CUR­RENCY MAT­TERS

By be­ing aware of how cur­rency fluc­tu­a­tions can af­fect you, and by be­ing pre­pared, your money could go a whole lot fur­ther, writes David Trumper

Living France - - Contents -

Our in­sider ex­plains how you can make your money go fur­ther

There are many things you can or­gan­ise in ad­vance when mak­ing the move to France, but no amount of plan­ning or re­search can change how the French prop­erty mar­ket is per­form­ing or what the ex­change rate will be when it’s time to pay for your new home.

France, and its econ­omy, have long been used as some­thing of a barom­e­ter for the en­tire Eu­ro­zone. If France is do­ing well then you could rea­son­ably ex­pect the rest of the Eu­ro­zone to be tick­ing along nicely. How­ever, this has not been the case for a while now.

In sum­mer 2015, we’ve fi­nally seen some growth re­turn­ing to the French econ­omy af­ter the best part of a two-year stag­na­tion. Re­cently, driven by wider de­fla­tion caused by fall­ing oil prices, con­sumer spend­ing has started to re­turn – al­beit rather slowly. And with un­em­ploy­ment still north of 10% at the end of 2014, it’s not dif­fi­cult to see why.

Un­like most Euro­pean coun­tries, how­ever, France is yet to re­ally ben­e­fit from the weaker euro cur­rency. Ger­many, Spain and Italy have all seen in­creases in de­mand for their ex­ports at far greater rates than France. Ger­many’s are up 12.4% since the be­gin­ning of the year, while Spain’s were up 6% alone in March. France, how­ever, has only man­aged a 2.5% gain since Jan­uary.

So what’s the cause of all this? Well, France’s man­u­fac­tur­ing sec­tor has con­tracted ev­ery month for the past 12 months, while oth­ers in the Eu­ro­zone have been grow­ing. Gov­ern­ment aus­ter­ity has lim­ited in­vest­ment in key in­dus­tries and money com­ing in from abroad has been di­rected to­wards other Eu­ro­zone na­tions to save on taxes and costs.

And here’s the bit you’re in­ter­ested in: what does this mean for the French hous­ing mar­ket and for ex­pats buy­ing prop­erty in France? Ac­tu­ally, it’s rather good news, since in the same way as France’s man­u­fac­tur­ing sec­tor has con­tracted, a sim­i­lar lack of in­vest­ment has been seen in the French hous­ing mar­ket. In the past 15 years, French house prices have in­creased by around 6% a year, but in 2014 prices fell by 2.4%, and with cheaper mort­gage rates, it’s a buy­ers’ mar­ket at the mo­ment.

With prices com­ing down, your money should go fur­ther. But that’s be­fore you’ve ac­counted for the ex­change rate. You may be sur­prised at just how much you could save – or lose – through the ex­change rates, and this is why it’s im­por­tant to get your fi­nances in or­der from the start.

EX­CHANGE RATES

One way to be pre­pared is by look­ing at the ex­change rate and mak­ing sure that you won’t end up pay­ing more than you’ve bud­geted for. For ex­am­ple, if you’re buy­ing a prop­erty in France worth €500,000, a 2% shift in the cur­rency rate is worth €10,000 – that’s the sort of fluc­tu­a­tion that could buy you a new kitchen, or have the gar­den land­scaped.

The pound has en­joyed real strength against the euro in 2015, and in Au­gust this year, it was 13% stronger against the sin­gle cur­rency than a year be­fore. In Au­gust 2014, one pound bought you €1.25. A year later, it would have bought you €1.41. If you were buy­ing a €1m prop­erty in France, it would have cost you £800,000 in Au­gust 2014, and just over £709,000 a year later – that’s a stag­ger­ing £91,000 less.

When it comes to ac­tu­ally mak­ing the trans­fer, and to make sure you’re not stung by un­com­pet­i­tive ex­change rates, it’s a good idea to speak to a cur­rency spe­cial­ist who will take the time to un­der­stand your re­quire­ments and of­fer op­tions that would best suit your needs. A good cur­rency spe­cial­ist will al­ways be on hand to guide you through the process.

You can’t con­trol the ex­change rates, but there is a way of guar­an­tee­ing your­self some con­trol and some cer­tainty over the rate you’ll end up get­ting, and that’s by mak­ing sure you use a for­ward con­tract.

Let’s say you’re buy­ing a prop­erty in France. You don’t need to pay the bal­ance for another two months, but you re­ally like the look of the cur­rent pound to euro ex­change rate. That’s ab­so­lutely fine. With a for­ward con­tract, you can se­cure that ex­change rate now, which means you’ll know ex­actly how much you’ll be pay­ing for the prop­erty when you set­tle the bal­ance in two months’ time; no mat­ter what the cur­rency mar­ket does in the mean­time.

Once you’ve signed on the dot­ted line and made the leap, the story doesn’t end there. You will still need to make reg­u­lar pay­ments and there are ways to en­sure that you make them in a fast, ef­fi­cient and cost-ef­fec­tive way.

If you haven’t bought the prop­erty out­right, you may need to pay mort­gage pay­ments ev­ery month. That’s where a cur­rency

ex­change com­pany comes in. You can choose for the pay­ment to be made from your UK bank ac­count ev­ery month at the ex­change rate on the day, or choose to fix an ex­change rate in ad­vance so you’ll know how much you’ll be pay­ing ev­ery month. This will help you bud­get, and you’ll have the peace of mind of know­ing that what­ever the ex­change rates do, you won’t be af­fected.

What’s also ben­e­fi­cial about reg­u­lar pay­ments is that they are paid au­to­mat­i­cally with­out you hav­ing to do a thing, which means that they give you more time for the more im­por­tant things, such as en­joy­ing your new sur­round­ings.

PEN­SION PAY­MENTS

You can claim your UK pen­sion and trans­fer it to France. Through what are known as Qual­i­fy­ing Recog­nised Over­seas Pen­sions Schemes (QROPS) – over­seas pen­sions which meet the rules of where they are lo­cated – you can have your pen­sion paid into your new French bank ac­count.

Once you have be­come a tax res­i­dent in France, you can trans­fer your pen­sion fund from the UK into your QROPS just as you would be­tween pen­sion providers back home. You needn’t worry about trans­fer­ring your work pen­sion scheme as you can trans­fer most types of pen­sion, in­clud­ing per­sonal pen­sions and

You may be sur­prised at just how much you could save – or lose – through the ex­change rates, and this is why it’s im­por­tant to get your fi­nances in or­der be­fore you start

those opted into through work.

And, of course, when trans­fer­ring your pen­sion from the UK, make sure you use a cur­rency ex­change com­pany to se­cure a com­pet­i­tive rate.

SEND­ING MONEY HOME

If you still need to send money home – per­haps you’re work­ing abroad, but your fam­ily is still liv­ing at home, or maybe you’re pay­ing a mort­gage on a sec­ond home – you can use a cur­rency ex­change com­pany to make those pay­ments for you. In the same way as reg­u­lar trans­fers work, you can ar­range for your salary to be sent au­to­mat­i­cally ev­ery month, ei­ther at the ex­change rate on the day, or at a rate you’ve fixed in ad­vance.

BUY­ING A FRENCH PROP­ERTY IS JUST THE START

There will al­ways be rea­sons to make cur­rency trans­fers, so it makes sense to save as much money as you can. Though no one knows where the ex­change rates will go, you can have some con­trol by fix­ing your rate and by choos­ing a cur­rency ex­change com­pany rather than a bank, with whom you could end up pay­ing much more – some­times 2, 3 or even 4% – through in­fe­rior ex­change rates. Speak to a cur­rency ex­pert and you may be sur­prised by how much you could save. www.times­cur­ren­cy­ser­vices.co.uk

David Trumper is a cur­rency ex­pert at Times Cur­rency Ser­vices

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