A strong housing market and the chance to keep your EU rights make this year a great time to buy. However, there is still a lot going on in 2020, so make sure you plan ahead to avoid these pitfalls.
Buying during the transition period
First off, however, the good news is that the transition period is now set in stone, and extends until 31st December 2020. Anyone who moves full-time to an EU country during that time will keep all their EU rights afterwards – so now really is a fantastic time for anyone looking at buying abroad. As a plus, as long as you’ve moved by that point, you don’t actually have to prove that you were there by 31st December 2020 until June 2021. Some countries, like France, have also extended the deadline for submitting your evidence until July of that year.
What are the risks?
Since the Brexit deal was confirmed, the pound has been largely above 1.18 euros, sometimes hitting 1.19. This relative strength is good news for property buyers compared to previous years after the Brexit vote. However, the big risk would be to assume that, because the pound has stayed up for half of this month, that it will still be like that when you come to pay for your property.
There is still an enormous amount of uncertainty around the upcoming trade negotiations. The deadline is extremely tight, with both sides acknowledging that it will not necessarily be a fully comprehensive trade deal within eleven months and rumours circulating of talks foundering on ‘red line’ issues like fishing rights almost from the start.
Any delay, or even a so-called ‘Australia deal’ – ie trading on WTO terms – could cause the pound to suddenly drop. If you were expecting to just send your money through the bank, then you could find that your budget suddenly gets you a lot less, and you’re left looking for thousands of pounds extra. £300,000 at 1.19 would get you €357,000. Just a 0.03 drop to 1.16 means it would only get you €348,000: a €9,000 difference and one that could put you under budget for a €350,000 house.
The message, then, is simple: don’t rely on the currency markets not moving in 2020 just because of the transition period. They are always moving, and they will have plenty of reason to do so during this year!
How can you protect yourself from losing money?
The solution for many of our clients is something called a forward contract. This simply means that you agree to secure a fixed exchange rate (today’s) for up to twelve months. You pay no extra fees for the transaction, but just a deposit of your total amount to secure the rate.
Then, when the markets move, you can sit back and relax, knowing your budget is completely unaffected. You’ve agreed to a fixed exchange rate, so yours won’t drop!
How much could your budget have changed by in the last 12 months?
How do I set up a forward contract?
It’s very simple. If you don’t have an account already, make sure to register today. This doesn’t oblige you to make a trade, but means we can talk through your requirements with you. If you do have an account, speak to your Personal Trader on 020 7898 0541 to get started.
Once you have agreed to the total amount and rate, the trader will purchase that complete amount for you. You will pay a 10% deposit, and you can then pay the rest as you would have before, at the point in the year when you want (eg when you offer on the house). Your money is held in secure, client-segregated accounts, and our traders do not work on commission.
Act today, and secure your overseas dream!