O&O Real Estate invited foreign exchange trading partner Capitex’s Joe Edwards, Managing director, to explain the importance of exchange rate fluctuations when buying overseas property…
Q: How do exchange rate fluctuations impact a foreign buyer investing in a property in Portugal or overseas?
A: Buying an international property is an exciting experience but comes with a significant financial commitment. It is important to have an in-depth understanding of how far your currency will go, consider legal fees and other costs associated with an overseas property purchase.
Small fluctuations in exchange rates can have a significant impact on the budget set aside for your overseas property. Many variables may cause a currency to fluctuate – from political to economic events, and market volatility can potentially impact your purchase price. Currently, the high inflationary market globally is causing central banks to make impactful decisions on their interest rate policies; this is having a big effect on exchange rates.
Working with clients to mitigate the currency risk involved when purchasing an overseas property is an important element of the process.
Q: How long do payments take to reach their destination country when sent via Capitex?
A: International payments sent via us will reach the beneficiary on the same day that the funds are sent, providing we receive our clients’ funds before the cut off time. Cut-off times can vary depending on the currency being purchased.
Making an international payment is not as simple as sending a domestic payment because funds must be routed via different payment networks and across different jurisdictions. To avoid delays and problems with the property transaction, buyers need specific FX (foreign exchange) expertise to ensure deadlines are met with funds sent to the beneficiary within the set time period.
Q: What are the advantages of using an FX specialist over a bank when buying overseas property?
Using an FX specialist rather than a bank brings several benefits when purchasing an overseas property.
Better exchange rates: offering more competitive exchange rates. We can access rates close to the mid-market and have greater flexibility than banks to provide clients with the best rate. This can result in significant cost savings when converting large sums of money to buy international property.
Lower fees: banks may charge higher fees for currency exchange services on top of the higher margin built into the exchange rate. As an FX specialist, we do not charge any fees and provide a competitive margin built into the exchange rate, making the overall cost of currency conversion far more competitive.
Personalised service: it’s imperative to tailor the service to our clients’ specific needs and provide insights into market trends, that can assist with the timings of booking an exchange. Part of this, includes a dedicated Account Manager to give guidance on risk management and mitigation, which can be invaluable when buying an overseas property.
Specialised knowledge: an FX specialist focuses only on foreign exchange with in-depth understanding of currency markets. Therefore, better positioned to give tailored advice than a bank with only generalist knowledge.
Risk management: when looking to buy an overseas property risk management should be considered. We provide a range of hedging products and strategies to protect against adverse exchange rate movements. These services are often inaccessible through a bank due to lack of customer service.
Faster transactions: for example, Capitex can often execute currency exchanges more quickly than banks, which may have longer processing times, especially for international transactions.
Q: What should you consider as a client when choosing a specialist foreign exchange provider?
A: When it comes to choosing a foreign exchange specialist, there can be a lot of information to take in. We would aways highlight the important factors below to give clients peace of mind that their overseas property purchase is in capable hands.
Q: At what stage of an overseas property purchase should you speak to a specialist FX consultant?
A: Always speak with an FX specialist early in the buying process. Exchange rates can be volatile and even small fluctuations can have a significant impact on the cost of your property, so it’s very important to seek expert guidance to mitigate currency risk, and not go above the budget you have planned for your overseas home or investment property.
Q: Fees, opening an FX account, security and safeguarding client funds?
A: There are no fees involved in engaging with Capitex. We earn revenue through the difference between the rate at which we purchase the currency through our counterparties and the rate at which we sell the currency to our clients – this is known as the spread or the
Opening an account is easy after registering online and going through compliance you can place a transaction and accounts can be opened within 24 hours.
As with any financial transaction, knowing that your funds are safe is of paramount importance. The security and protection of our clients’ funds should be at the core of an operation regulated by the FCA.
Safeguarding is the method which ensures customers’ relevant funds are segregated from company funds and held with reputable banks during the period we hold them. We do not speculate on the currency markets. When instructed to place a foreign exchange transaction, we immediately instruct a covering transaction with our counterparty, so any market risk is nullified.