Greece leaves British property buyers in the dark over exchange rates
As the Greek government finally voted to accept crushing austerity measures yesterday by a majority of 2 to 1 MPs, Robin Haynes, MD of FSA regulated and award-winning Currency Index asks what this means for exchange rates for British buyers of European property?
“The weaker Euro since the crisis escalated in November, has given Brits buying in Europe the best exchange rates since October 2010. A Pound now goes nearly 8% further than it did last summer, and with real estate prices continuing to drop across Europe, overseas property is now as cheap as it has been for many years. With the Eurozone crisis rolling on, Greece must work to accept its bailout package by March 20th to avoid defaulting on its debts.
“The Euro is expected to strengthen once the bailout is finally completed. This is because there will be, temporarily at least, stability in the debt markets, with Greece able to refinance its loans and therefore likely to stay in the Eurozone. The Euro will once again be seen as a safer currency with disaster averted, and if investors buy Euros, the price will rise giving lower exchange rates for buying the single currency.
“The short term outlook is a little harder to predict, giving mixed signals for people looking to exchange sterling to Euros, due to ongoing unrest in Greece and worries that the austerity measures may not actually be implemented. The EU and IMF have had enough of broken promises and funds will only be released to Greece when there is clear commitment to implementing the measures.
“While nobody wants to see riots in Athens, instability in the fragile political and economic environment in Greece may give further weakness in the Euro, and we could therefore see a short term spike in Euro exchange rates which buyers can take advantage of before the situation is resolved and, presumably, the bailout goes ahead.
“Eurozone finance ministers meet on Wednesday, by which time the fragile ruling coalition must say how €325m of the €3.3bn in budget savings will be achieved. Brussels also wants written commitments that the terms of the deal will be implemented, even after an election pencilled in for April.
“With this in mind, many buyers of overseas property are currently looking to fix an exchange rate in advance. This can be achieved by using a Forward Contract from a reputable currency broker, and guarantees a rate now for a transfer up to 2 years in the future, so that once the Greek problems are resolved, the sterling cost of a property elsewhere in Europe cannot increase due to a strengthening Euro.”
For more information on currency exchange and Forward Contracts contact Currency Index today on 0800 043 2623 or visit www.currencyindex.co.uk.