Euro or greenback? It's been a rollercoaster...

The euro is surging against the pound; British investors have flooded the markets in Spain and France - suddenly a second home in the States looks like better value. Ginetta Vedrickas on why UK buyers are looking across the Atlantic
Click to follow
The Independent Online

Getting a good exchange rate can mean the difference between a good and a great holiday and more bang for your bucks could see you upgrading from a hostel to a luxury hotel. But if currency fluctuations affect your holiday budget, just imagine what difference they make when you're buying a property abroad.

Getting a good exchange rate can mean the difference between a good and a great holiday and more bang for your bucks could see you upgrading from a hostel to a luxury hotel. But if currency fluctuations affect your holiday budget, just imagine what difference they make when you're buying a property abroad.

Robert Hooker from Maidstone Kent first started thinking about buying an investment property over a year ago: "I quickly ruled out buying in the UK; the current high prices mean that value for money just isn't there." He considered other European countries including Spain and Cyprus but was again deterred by spiralling prices, so when a friend bought a property in the US, Hooker began researching the market: "I was amazed by just what you could get for your money, and that was when the exchange rate wasn't even that good."

As Hooker watched the pound gather strength against the dollar in the next 12 months, he became convinced: "It took me a year to do my research and to pluck up courage. I went from mildly curious to thinking that yes, I could do it, and the strength of the pound made all the difference." He finally contacted a US-based agent and went on an inspection visit: "I'd decided on a budget and property type but when I went over there everything was literally being snapped up so I made a spontaneous decision to buy a more expensive property."

Hooker paid $291,100 for a four-bed villa with pool at the Windsor Hills Development in Orlando. He admits that the favourable exchange rate played a large part in his decision: "Even though prices were rising, had I bought a year earlier when I first started thinking about it I would have only been able to afford something smaller, so this was very tempting." He purchased his home off-plan, with completion set for March 2005, and "forward bought" dollars, securing a favourable exchange rate for 12 months. "I'm very happy as I now know exactly how much I will have to pay and can plan for that."

David Clark, head of personal transfers for Travelex, is seeing more potential investors like Hooker. "There has been a gold rush across the Atlantic as Britons seek to cash in on a weak dollar. Over the last few months we have seen a real surge in the popularity of the US as a destination for Britons looking for a second home."

Research seems to bear this out. Figures show that in January last year the average cost of a US home was $157,000 (£97,516). An identical property bought this January would cost $164,650, which translates into just £89,108. Even though prices rose by 5 per cent the actual cost in pounds has fallen by 9.5 per cent. Conversely buyers who are set on buying in Europe have been adversely affected by the pound's weaker performance against the euro.

In February, the price of an average property in "Euroland" stood at €183,384 which, based on the exchange rate at time of press, is £124,497. In February last year the average price was €169,650 (then £115,173), with the result that Britons are spending on average around 7.5 per cent more and some buyers are feeling the pinch.

Last year, Margaret and David Thomas from Cardiff bought a stone farmhouse in Lot et Garonne, south-west France: "We paid just over €100,000 but it's a wreck and requires total renovation from head to toe. We didn't intend buying somewhere that needed quite so much work but in the end we had to if we wanted the space as the combination of rising property prices and the weakening of the pound was against us. Had we bought sooner we could have saved ourselves not just money but a lot of hard work."

The Thomases would not consider buying anywhere except France, but there are other destinations where British buyers can take advantage of a strong pound. Agents selling in the Caribbean and Canada report increased interest, which they believe is linked to the current state of currencies. South Africa, too, is becoming an extremely popular destination for overseas buyers because the rand is comparatively weak. Andrew Smith, MD of Cluttons Cape Town, is seeing growing interest from the British market. The rand slid from R11 to the pound in March 2001 to R20 in December 2001 after September 11. "This prompted a lot of people to buy, as Cape Town house prices had not yet started the run which they experienced during 2002-2003," he says.

Cyprus has seen British sterling increase by 8 per cent against its own pound since June 2003. "It's not a great deal of movement but take into the account the fact that prices will also increase when they join the EU and it becomes more significant," says Travelex's Ramnath Ramhit. He believes that the exchange rate is just one factor when people decide on destination: "They are looking for value for money. Take Florida - flights are relatively cheap, they like the fact that there's no culture difference and here is something for everyone from golf to Disney, so there are better investment opportunities."

Ramhit does not believe that buyers should be entirely led by advantageous currency fluctuations - "You should buy where you want to spend time and where you feel comfortable" - but there is only one destination that appeals to him. "Personally I'd be looking at the States. English people are always going to want to take holidays there and the specifications of the properties are so much higher than here."


* Understand the terminology. Spot transactions allow you to transfer funds immediately in line with the current exchange rate.

* Forward contracts allow you to fix a rate now for a future completion date, which may be particularly useful when buying off plan.

* Think about securing a favourable foreign exchange rate as early as possible, well before you actually buy.

* Get a decent lawyer - legal wrangling slows the process, increasing exposure to foreign exchange risk.

Travelex: 0870 010 0095;

Cluttons Cape Town: 00 27 21 6830088