Cur­rency

Could poli­cal change af­fect the value of your French prop­erty?

French Property News - - Contents - Joshua Priv­ett is a se­nior ex­ec­u­tive dealer at For­eign Cur­rency Di­rect cur­ren­cies.co.uk

French prop­erty buy­ers’ for­tunes are now tied to the Twit­ter feed of the leader of the most pow­er­ful na­tion on earth

Be­fore 2016, Don­ald Trump’s cam­paign for the pres­i­dency was seen as a pub­lic­ity stunt. As we edged closer to Novem­ber, he was a cred­i­ble can­di­date with the po­ten­tial to win. With 2017 and his in­au­gu­ra­tion over with, French prop­erty buy­ers’ for­tunes are now, in part, tied to the Twit­ter feed of the leader of the most pow­er­ful na­tion on earth.

With Amer­ica’s stand­ing in the world econ­omy, and with the for­eign ex­change mar­ket be­ing the largest mar­ket of them all, there will al­ways be rip­ple ef­fects. In this case, for the value of the euro, the value of the pound, and there­fore the ‘real value’ of the French prop­erty you are buy­ing or ex­cit­edly wait­ing to view.

Look back at Brexit

One cru­cial as­pect of Brexit to re­mem­ber is that, what­ever your per­sonal pol­i­tics, fi­nan­cial mar­kets were vis­i­bly up­set by the news. His­tor­i­cally, they have been loath to sud­den and sig­nif­i­cant changes to the sta­tus quo, and they showed their dis­plea­sure re­peat­edly since last June with large de­pre­ci­a­tions in the pound’s value.

Since then the pound has re­cov­ered to health­ier lev­els com­pared to last Oc­to­ber, and French prop­erty buy­ers can lay some of their thanks at the feet of the con­tro­ver­sial pres­i­dent him­self. Once he won the elec­tion, pound to euro ex­change rates rock­eted by over four cents in just three days. The rea­son­ing be­hind the sud­den surge of sup­port was due to Trump’s very vo­cal and un­wa­ver­ing sup­port for Brexit.

Hav­ing an ar­dent Brex­iter at the helm of the US econ­omy gave enough con­fi­dence for in­vest­ment in the pound to rally once more, and the knock-on ef­fect saw its value rise against the likes of the euro to the ben­e­fit of any­one plan­ning to use their saved or loaned ster­ling to se­cure a prop­erty across the Chan­nel.

Since then we have seen a few other oc­ca­sions where his ac­tions have made French prop­er­ties cheaper for Uk-based buy­ers. Theresa May’s state visit to the US in Jan­uary, Trump’s al­le­ga­tion at the euro’s value as be­ing pur­pose­fully de­val­ued by Ger­many, and his af­fir­ma­tion that a trade deal be­tween the US and the UK could be es­tab­lished within a short 90-day pe­riod have oc­curred along­side pos­i­tive ral­lies on GBP/EUR – show­ing clear par­al­lels be­tween Trump’s ac­tions and the im­prove­ment of the pound’s for­tunes over the un­for­tu­nate euro.

More to come?

The cur­rent de­bate is whether the Trump Fac­tor will con­tinue to bite on cur­rency mar­kets, or whether his con­tin­ued bark­ing will end up be­ing seen as all talk and fade into the back­ground.

His pow­ers have been put in check with ex­ec­u­tive or­ders be­ing chal­lenged and a his­tor­i­cally long bat­tle on the con­fir­ma­tion of his cab­i­net. He faces a bat­tle over his wall and find­ing an al­ter­na­tive for Oba­macare. Some are say­ing he will be so pre­oc­cu­pied at home that his winning in­ter­ven­tion in Euro­pean af­fairs which has so far as­sisted euro buy­ers may slow from a flood to a trickle.

One thing can be guar­an­teed: we have lit­tle clue what Trump may say to­mor­row. With this un­prece­dented en­gage­ment from a sit­ting pres­i­dent with the me­dia, and by ex­ten­sion fi­nan­cial mar­kets, we will all be kept on our toes over the next four years.

A look to Europe

The last few years have seen the largest swings on record for pound to euro ex­change rates. In 2015, the Greek debt cri­sis al­lowed GBP/ EUR to climb to multi-year highs around the 1.40 mark. 2016 saw the spot­light shift to­wards the UK, with the shock of a Brexit vote see­ing the pound fall against the euro to be­low 1.10. This year is al­ready show­ing signs of more bal­anced fo­cus by cur­rency mar­kets in the two ar­eas.

The ‘year of pol­i­tics’ is a term you may have heard thrown around on the news, and high­lights just how many forks in the road the Euro­zone will be fac­ing this year. Elec­tions are to be held in the Nether­lands, France and Ger­many, with Italy also po­ten­tially fac­ing ear­lier vot­ing from the orig­i­nal 2018 sched­ule. All of which face the po­ten­tial chal­lenge from anti-eu par­ties to gain power.

Sta­ble mates

The euro’s value is tied to the im­age of the sta­bil­ity of the Euro­zone, which has seen reg­u­lar chal­lenges in re­cent years, and these now ap­pear to be com­ing to a head. The po­ten­tial for Greece to leave the Euro­zone and de­fault on its debts in 2015 saw the euro’s value plum­met in sim­i­lar fash­ion to what the pound ex­pe­ri­enced last June with the Brexit vote.

It is im­por­tant to re­mem­ber that it is only spec­u­la­tion that such elec­tions may lead to fur­ther ref­er­en­dums on EU mem­ber­ship, and that the timescales in­volved for such pro­cesses are very long. This will be an evolv­ing story which will con­tinue to af­fect the bud­get of euro buy­ers this year and, as such, it is im­per­a­tive that you re­main an in­formed pur­chaser in or­der to se­cure a com­pet­i­tive rate you are com­fort­able with for your cur­rency trans­fer.

Cur­rency ex­change bro­kers of­fer proac­tive ser­vices to keep you up­dated on changes in the po­lit­i­cal land­scape and how this may im­pact any­one with a fi­nan­cial obli­ga­tion com­ing up to com­plete on a prop­erty, or even to help those bud­get­ing on prop­er­ties they will be view­ing shortly.

If tempting lev­els to buy are reached dur­ing this tu­mul­tuous pe­riod, but you are not quite ready to com­plete on a prop­erty, you also have the op­tion to pre-book your cur­rency for a fu­ture pur­chase at lev­els avail­able on that day. This avoids your bud­get chang­ing ev­ery few sec­onds along­side the cur­rency mar­kets.

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