QE spells heaven for overseas property buyers in Europe
One week into the new European Central Bank’s $1 trillion quantitative easing programme and some of the effects are already visible. Whilst the dollar has stood firm, the euro has weakened significantly against both sterling and the US dollar. These changes will benefit international mortgage buyers of European property paid in US dollars or currencies pegged to the dollar, as well as those paid in sterling, whether in the UK or abroad.
In both cases, exchange rates have moved significantly to favour those thinking of investing in assets priced in euros, such as property in France Spain, Italy or Portugal. The benefits are there for all, whether you are hoping to snap up a ski chalet, a country house in rural France, a finca in Spain or a villa in Italy.
One year ago, expatriates based in Middle and Far Eastern countries where the exchange rate is pegged to the US dollar would have needed around $1.35 to purchase one Euro. Move forward 12 months, with QE underway in Europe and the Swiss Franc cap removed, those same buyers need to find just $1.12 to buy a euro. What that means in practice, is that through the effect of currency changes alone, properties in Europe are now effectively 18% cheaper for US dollar buyers or those paid in currencies pegged to the Dollar.
In the UK too, the position is similar. A year ago, a euro would have cost around 83pence, today that price has fallen to around 75pence, a fall of some 10%.
Guy Stephenson, a spokesman for international mortgage brokers Offshoreonline.org said, “For those looking to invest in European property, recent dramatic changes in exchange rates have been good news. US dollar and sterling based buyers have seen effective price falls of between 10% and 20%. Against the background of a still weak property market in much of Europe, this opens up some very attractive opportunities for property buyers from overseas.”
At the same time, euro mortgage rates in France continue to edge lower, with any long term fixed rates having been cut recently. 10 year fixed rates are now available from just 2.70%, allowing buyers to lock into a high level of repayment security, whilst euro mortgages are available in Spain from 3.55% and in Italy from 3%.