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Currency offers for buyers - 9 June 2008
While the economic jitters in the UK continue, and the price of oil once again rose to a new high over the weekend, some overseas property companies are doing what they can to ensure that buyers have some kind of protection from the economic forces driving the market. In a move designed to reassure the market that they are aware of the rising exchange rates of the Euro against Sterling, agents and developers have been exploring ways to insulate buyers against the worst of the fluctuations in the money markets.
The decline of Sterling against the Euro has seen the rate of exchange fall to such an extent as to make one Pound worth just €1.25, compared to around €1.50 a year ago. This in turn makes the price of properties in the Eurozone significantly higher, thus restricting what buyers are able to afford.
Developers in both Turkey and Spain have introduced fixed Euro rates to reassure buyers that they are getting the best deals available. In Spain, Titan Properties has put a rate of €1.4 to the Pound indefinitely on its properties, and claims that there has been undue worry for many people in calculating the increased cost of their property. Andrew Benitz, director of Titan Properties, said that for many customers, taking out a Euro mortgage on the property meant they are only exposed to the currency fluctuations on the initial 20 per cent deposit of their purchase.
“In a typical 20 per cent deposit/80 per cent balance payment scenario, the weakened Pound would only affect that first 20 per cent with a Euro denominated mortgage covering the final 80 per cent, and therefore no further exchange rate risk to bear, assuming rental income is in Euros and goes some way to cover the monthly mortgage payments. People are erroneously frightening themselves by adding 17 per cent on to the full asking price falsely believing they have to find tens of thousands of Pounds more, whereas just a couple of thousand is more likely. A buyers’ loss on currency exchange on a €200,000 property from €1.4 to the Pound versus €1.26 is not £16,000 but just over £3,000.”
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