Why I Don't Try To Time The Currency
June 17, 2014, Panama City, Panama: Which is more important when investing in property overseas—market or currency exchange rates?
Dear Live and Invest Overseas Reader,
The euro is on a downward slide that appears likely to continue in the wake of the recent nominal rate cut by the European Central Bank. Unfortunately for me, I just converted U.S. dollars to euros to buy an apartment in Paris at possibly the worst time in the last two-and-a-half years to have made such an exchange.
As I say often, you can't try to time international real estate buys to exchange rates.
With interest rates so low, why didn't I borrow to buy the apartment? French banks are holding a tight leash on mortgage lending to foreigners...especially self-employed foreigners. The banks prefer if you're working for a large listed company. In their eyes, that suggests stability.
On the other hand, my purchase was well timed from a market perspective (and a personal one). The Paris property market was soft last year, with much of the city seeing slight price declines. Had I waited for currency rates to move in my favor before looking for an apartment, I would have run the risk of prices going back up...as they have done.
I negotiated and locked in the purchase price for this apartment last November. The closing was delayed as I tried to get a mortgage, and we finally closed just a couple of weeks ago. In the interim six months, prices have started moving up again in the arrondissement where I bought. Prices aside, had I held off making the purchase while waiting for the euro to weaken against the U.S. dollar, the apartment I found (and wanted to buy) would have been gone.