Expats face dwindling incomes as a result of currency fluctuations which have resulted in sterling being weaker against most currencies than it was 12 months ago. One pound will now buy €1.15, US1.56 and HK$11.74 compared to €1.20, US$1.59 and HK$12.30 a year ago. This can mean those transferring monthly incomes receive hundreds of pounds less and those transferring large sums for buying a house can be thousands of pounds worse off.
Expats involved in the export and import business are also affected as only last summer £500 would have bought €642.50, now it is only €579. For those making bigger commitments £50,000 will today only buy US$78,250 compared to US$81,100 last summer.
There is an even bigger discrepancy in the Eurozone, where investors eye properties in a number of markets including France, Italy, Germany and even Estonia. Buying £50,000 of Euros today will return €6,350 less than it would have around the time of the Olympics. ‘Economic uncertainty, the downgrading of the UK’s credit rating and the imminent threat of an unprecedented triple dip recession have all contributed to a steep decline in the value of sterling against most other major currencies in recent months,’ said Stephen Hughes, director of Currencies.co.uk.
‘This trend may continue into the second half of 2013 with very few signs of a sustained period of recovery coming out of the UK,’ he added.
However, more expats are looking to buy in the UK, according to The Buying Solution. Currency fluctuations means that those buying from abroad get more for their money and this is an issue that makes property in London, for example, very attractive to overseas buyers. The Buying Solution is also seeing an increase in the number of UK expats repatriating to the Home Counties as a result of the weakening pound and strengthening London property market.
Quote from ExpatForum.com : “Hi, We’re just getting together the information about our assets abroad for the new tax law. Does anyone know if there is an official exchange rate published by the Spanish Tax Office, pounds to euros, for the last tax year? Thanks.”
‘The weakening pound is not only benefitting overseas nationals looking to invest in the UK property market, but those UK nationals repatriating. We’re seeing a number of buyers who work in finance and have been posted overseas for a few years returning to Britain and wanting to purchase a family home in the Home Counties,’ said Nick Mead, associate in the Home Counties at The Buying Solution. ‘Such people often leave the UK as a couple, renting out their London flat as part of the process, and return married with young children three to five years later. They will have been remunerated in the local currency, and as such, benefit from sterling’s weakness,’ he explained.
‘At the same time, the increase in property prices in London means that when they return, they can also cash in on the strengthened London market by selling their property. These buyers , many of whom want to purchase in the Home Counties for schooling, are exceptionally motivated due to the pressure on finding a home for their return,’ he added.
Rachel Thompson, the firm’s associate in London, said that there is strong demand from international buyers fuelled by the weak pound. ‘Those buying now are benefitting from a devalued currency, low interest rates and, in comparison to some countries, low property taxes,’ she pointed out.
‘Because of this, to some, property prices are up to 30% cheaper now than they were in 2007/2008, despite prime central London property prices being 17% higher. Property is a tangible asset that can be held for the long term, and when the pound strengthens again, overseas investors will benefit from both the likely uplift in the market and the currency,’ she added.