{"id":19448,"date":"2019-03-07T07:12:20","date_gmt":"2019-03-07T07:12:20","guid":{"rendered":"https:\/\/www.thehouseshop.com\/property-blog\/?p=19448"},"modified":"2022-03-04T16:24:23","modified_gmt":"2022-03-04T16:24:23","slug":"how-exchange-rates-affect-real-estate-market-abroad","status":"publish","type":"post","link":"https:\/\/www.thehouseshop.com\/property-blog\/how-exchange-rates-affect-real-estate-market-abroad\/","title":{"rendered":"How Exchange Rates Affect Real Estate Market Abroad"},"content":{"rendered":"\n<!-- SEO Ultimate Plus (https:\/\/seoultimateplus.com) - Code Inserter module -->\n<script async>(function(s,u,m,o,j,v){j=u.createElement(m);v=u.getElementsByTagName(m)[0];j.async=1;j.src=o;j.dataset.sumoSiteId='b68b392479b5981b8acf46565e9fe32a0734fc21a1f7c1e60121eaa6ca1a1c64';v.parentNode.insertBefore(j,v)})(window,document,'script','\/\/load.sumo.com\/');<\/script>\n<!-- \/SEO Ultimate Plus -->\n\n<p><span style=\"font-weight: 400;\">Globalization offers international investors the opportunity to build wealth and own property anywhere on the globe. Real estate continues to be one of the attractive sectors for investors. When investing in real estate abroad, <\/span><b><i>investors pay keen attention to a number of factors including:<\/i><\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">trends in the demand and supply of residential and commercial property in the target \u00a0\u00a0\u00a0market<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">interest rates <\/span><span style=\"font-weight: 400;\">(if there is intention to borrow in the foreign currency)<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> taxes (for rentals)<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> exchange rates<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Exchange rates are of specific interest in this article. Movements in foreign exchange rates are caused by economic factors such as inflation, monetary policy, consumer confidence, balance of payments, and <\/span><a href=\"https:\/\/data.worldbank.org\/indicator\/NY.GDP.MKTP.KD.ZG?view=map\"><span style=\"font-weight: 400;\">GDP dynamics<\/span><\/a><span style=\"font-weight: 400;\">. International investors need to follow exchange rate fluctuations closely because they have significant influence over the real estate market.<\/span> Below, we explore ways in which Forex rates affect this market.<\/p>\n<h2><span style=\"font-weight: 400;\">When a currency becomes stronger, property prices increase<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">If a foreign currency strengthens against the dollar, for instance, you would have to use more dollars to purchase property in the foreign country. This implies that the property\u2019s price increases and yields fall. The best time to buy property in another country, therefore, is when your home currency strengthens against the foreign country\u2019s currency.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Currency devaluation: Good or bad for investors?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Currency devaluation may mean different things to different types of foreign property investors. If you are a foreign property buyer, currency devaluation in a country that has strong foreign investor presence may prompt extraordinary demand for property.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A weakening currency poses risks to international landlords because it reduces their income when it is converted into the stronger currency. For example, if an US investor has commercial property in China and the <\/span><a href=\"https:\/\/finance.yahoo.com\/quote\/USDCNY=X\/\"><span style=\"font-weight: 400;\">USD\/CNY<\/span><\/a><span style=\"font-weight: 400;\"> changes from <\/span><i><span style=\"font-weight: 400;\">6.71CNY\/USD<\/span><\/i><span style=\"font-weight: 400;\"><\/span> to <i><span style=\"font-weight: 400;\">7CNY\/USD<\/span><\/i><span style=\"font-weight: 400;\"><\/span>, rental income of CNY 1,000,000 reduces from <i><span style=\"font-weight: 400;\">USD 149,031<\/span><\/i><span style=\"font-weight: 400;\"> to<\/span><i><span style=\"font-weight: 400;\"> USD 142,857.<\/span><\/i><\/p>\n<h2><span style=\"font-weight: 400;\">A growing currency: better to sell rather than buy foreign property<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">When a foreign currency grows, as evidenced by falling <a href=\"https:\/\/hardbacon.ca\/en\/calculator\/currency-exchange-rate-calculator\/\" target=\"_blank\" rel=\"noopener\">exchange rates<\/a> against the international investor\u2019s home currency, property maintenance becomes more expensive and this reduces property yields. During such times, it is more profitable to sell than to buy property.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Exchange rates affect the cost of living<\/span><\/h2>\n<p><span style=\"font-weight: 400;\"><img loading=\"lazy\" class=\"alignnone  wp-image-19466\" src=\"https:\/\/www.thehouseshop.com\/property-blog\/wp-content\/uploads\/2019\/03\/Phone-and-paper.jpg\" alt=\"\" width=\"644\" height=\"368\" \/><\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you plan to buy property in a foreign country and spend a significant amount of time in that country as well, <\/span><i><span style=\"font-weight: 400;\">the exchange rate will impact your cost of living<\/span><\/i><span style=\"font-weight: 400;\"><\/span>. A weak home currency will increase your cost of living because it purchases less of the foreign currency you are using. On the other hand, a stronger home currency lowers your living costs.<\/p>\n<p><span style=\"font-weight: 400;\">Factoring in exchange rates when making foreign property investments<\/span><i><span style=\"font-weight: 400;\"> can make the math sophisticated for many investors<\/span><\/i><span style=\"font-weight: 400;\">. Here are a few jargon-free basic considerations to make when buying property overseas:<\/span><\/p>\n<p><b>Currency to be used in the property buying transaction:<\/b><span style=\"font-weight: 400;\"> Property can be traded either in the home or foreign currency. You should be concerned about transaction risk if the transaction will be carried out in the foreign currency. The strength of your home currency will determine the value of the property. If a choice is given to use either currency, it is better to buy foreign property using foreign currency if your home currency is strong.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Avoid currency risk by living in the property you bought in <\/span><a href=\"https:\/\/community.intuit.com\/articles\/1785972-what-are-home-currency-adjustments\"><span style=\"font-weight: 400;\">a home currency based market<\/span><\/a><span style=\"font-weight: 400;\">. You will not need to convert any currencies and this means currency risk is completely avoided.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In case of foreign <a href=\"https:\/\/www.thehouseshop.com\/property-to-rent\" title=\"rental property\">rental property<\/a>, a strengthening foreign currency reduces the rental income when it is converted into your home currency.<\/span><\/p>\n<p><b><i>Exchange rates affect <a href=\"https:\/\/www.thehouseshop.com\/property-management\" title=\"Property Management\">property management<\/a> costs. <\/i><\/b><span style=\"font-weight: 400;\">Consider an investor whose home currency is the dollar. In periods when the dollar is strengthening, for instance, operating expenses such as utilities, homeowner association fees, and taxes reduce in dollar terms. When the dollar weakens,<\/span><i><span style=\"font-weight: 400;\"> property management costs increase dollar terms<\/span><\/i><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Forex affiliates<\/span><span style=\"font-weight: 400;\">, trader and brokers make up a significant part of international property buyers. They have a considerable advantage over other types of overseas property investors since they can closely follow fluctuations in exchange rates in order to reduce foreign exchange risks and maximize profits when trading property.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">All Investors need to take exchange rate fluctuations as an equally important factor of consideration when planning to invest in foreign property. Exchange rate adjustments are specifically crucial for buyers engaged in long-term real estate projects abroad. It\u2019s clear that exchange rates affect not only property prices but also property management costs, the owner\u2019s living costs and ultimately the property\u2019s yields.<\/span><\/p>\n<h6><span style=\"color: #999999;\">Ref : THSI-2688 \/ ZD24056<\/span><\/h6>\n","protected":false},"excerpt":{"rendered":"<p>Globalization offers international investors the opportunity to build wealth and own property anywhere on the globe. Real estate continues to be one of the attractive sectors for investors. When investing in real estate abroad, investors pay keen attention to a<span class=\"ellipsis\">&hellip;<\/span><\/p>\n<div class=\"read-more\"><a href=\"https:\/\/www.thehouseshop.com\/property-blog\/how-exchange-rates-affect-real-estate-market-abroad\/\">Read more &#8250;<\/a><\/div>\n<p><!-- end of .read-more --><\/p>\n","protected":false},"author":41,"featured_media":19449,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wl_entities_gutenberg":"","_lmt_disableupdate":"","_lmt_disable":"","spay_email":""},"categories":[15],"tags":[],"wl_entity_type":[602],"modified_by":"Editor","_wl_alt_label":[],"jetpack_featured_media_url":"https:\/\/www.thehouseshop.com\/property-blog\/wp-content\/uploads\/2019\/03\/Meeting.jpg","wl:entity_url":"http:\/\/data.wordlift.io\/wl0502\/post\/how_exchange_rates_affect_real_estate_market_abroad","_links":{"self":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts\/19448"}],"collection":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/users\/41"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/comments?post=19448"}],"version-history":[{"count":5,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts\/19448\/revisions"}],"predecessor-version":[{"id":26896,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts\/19448\/revisions\/26896"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/media\/19449"}],"wp:attachment":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/media?parent=19448"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/categories?post=19448"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/tags?post=19448"},{"taxonomy":"wl_entity_type","embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/wl_entity_type?post=19448"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}