If you’ve taken a walk down the calles of Palma recently, you’ve no doubt noticed an increase in real estate agents and property support businesses.
The housing market is booming on Mallorca and across the Balearics. Property professionals are reporting an increase in enquiries, offers and, most importantly, sales.
Construction and renovation projects are also on the rise, especially in and around Palma. Investors are buying up abandoned buildings for conversion to apartments and rental properties.
Furthermore, developers are in various phases of planning and building of new boutique hotels, resorts, shopping centres and commercial zones around the island.
Whether you are contemplating purchasing an island home or developing a massive property, and your finances are held in non-Euro accounts, then the issue of currency exchange rates and forecasts are of paramount importance. It’s wise to chat with a currency exchange expert.
Most simply, you can save money when transferring your funds via a currency broker vs. a bank. Imagine you are sending Pounds to pay for a €500,000 property. The current exchange rate the bank will offer is €1.097 (based on rates in March 2017). Add on a transfer fee of up to £25, and the amount in Pounds will be £455,788. Using a currency broker on that same day (at €1.15 to the Pound) might be £434,782. This is a savings of £21,000.
More strategically, working with a currency broker early in the property bidding process, can help you avoid adverse currency fluctuations. You see, in the past, rates were fairly simple to predict. In recent years, however, economic volatility and political events have created fluctuations in the value of the Pound and Euro. Not paying attention could cost you more than it should.
For example, before Brexit election results, Mr. John Brit had a healthy budget of £1 million to purchase a perfect retirement home on Mallorca. The exchange rate at the time was around 1.40, so the target given to his real estate agent was €1.4 million. The ideal property was found at the top of his budget and the deal agreed. Until…
The realisation sets in that, post election, the exchange rate has moved quite dramatically and Mr. Brit can no longer achieve the €1.4 million agreed. He can’t even reach €1.2 million at the current rate for his Sterling. Had the rate been fixed on a forward contract for him at the beginning of his search, there would be no issue to resolve, and the sale would go ahead as planned.
In cases like Mr. Brit’s, a good currency exchange broker will probably remove any uncertainty created by volatile exchange rates. By talking to them early in the process of looking for a property, they can watch the markets on your behalf.
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This article was written on the 17th of March, 2017.