Financial Perspectives

If you’re selling property outside your home country it’s easy to fall into the trap of pricing it in the local currency and then forgetting about it.

That usually works fine if property sales in the foreign country move at a fairly brisk pace but often they move at a much more sedate pace than you are accustomed to. Whilst exchange rates between the major currencies rarely move quickly they do move and over a period of many months the price translated back into your home currency can change quite substantially.

For example, take a property that you wanted to sell for £60,000 at the start of 2007 and you therefore priced it at EUR 90,000 (£60,641). By the start of 2008 you could sell that property for EUR 85,000 and pick up £62,553. You might think that a year is a long time to have a property on sale but in many European markets property sales proceed at a very sedate pace and it’s not unusual to have a house for sale for quite an extended period before you find a buyer.

If you are counting in your home currency it can often pay to check whether or not you can lower the local price but still collect the same amount of money as obviously it can speed up the sale of the property.

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Normally people move from savings to investment but draw the line at risky investments and don’t consider gambling as being in the same continum.

But it is. Certainly savings and gambling are very much at the extreme ends of that continum but some high risk investments aren’t nearly so far from gambling as the investment community in general would have you believe.

Is it any more risky to put £1 on a horse or to put £1 on a penny share? Well, sure, it’s usually riskier to put it on a horse BUT remember that whilst you might put £1 on a horse, chances are it would be more like £1000 that you’d be putting on that penny share which is a whole lot more to lose.

Of course, that difference in the amount of money involved is critical in how you should rate a gamble as compared to a very high risk investment. However, don’t forget that even the safest investments are also gambles as any investor in Northern Rock will tell you now or for that matter policy holders in what was the even more solid Equitable Life.

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Although you’d think that there would be fewer Americans travelling abroad these days with the weak dollar, it seems to be the opposite that’s true. Not only are they travelling abroad more, but they’re considering purchasing property abroad too which is relatively unusual as well.

The dollar makes for a really serious price rise from the American perspective. Take the example of a property notionally priced at €800,000. Not so long ago that would have equated to around $1,000,000 but these days it’s a lot closer to $1,400,000 which is one serious price rise by any measure.

But even on the much smaller scale of vacation spending there’s quite a significant effect on costs if your income is in dollars. Typically this means that Americans on vacation in Europe need to downgrade the quality of accommodation that they use during their travels and we’ve noticed a significant shift towards the use of hostel reservation systems which wouldn’t normally generate much American business.

On the other side of the coin this, of course, means that property in America is pretty cheap for Europeans at the moment and it’s quite common to see American property promoted in European markets currently. If only I’d a few dollars to spare, I’d be quite tempted to buy a vacation rental property over there at the moment as the current strong euro/weak dollar isn’t what one would normally expect ie there’s going to be a swing back the other way in due course.

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