When investing in property abroad, many people fail to take into consideration the impact that fluctuating exchange rates can have on the price of a home.
The property market across many parts of the eurozone, for instance, has been improving, with property prices appreciating in many popular countries, such as Portugal and Spain, in recent months. But aside from higher property prices, Brits have also had to deal with the depreciating strength of the UK pound against the euro, which recently fell to a three-year low at €1.17, representing a major decline on the near €1.40 to £1 achievable 18 month ago.
But the pound-to-euro exchange rate is showing signs of recovery this month after a topsy-turvy year. The pound has bounced back from its post-Brexit low and is currently trading against the euro at £1 - €1.19.
With German and French election looming, there is every chance that the pound to euro exchange rate could strengthen further in the coming months, which would be good news for UK-based investors seeking to buy property in the eurozone.
If you do not plan to buy property in the eurozone now, but may do so within the next couple of years, you could consider taking out ‘forward contracts’, a tool to freeze exchange rates, rather than gamble on volatile currency markets.