Buying a Property in France? Make Sure You Plan Ahead

Richard and Jane had decided after years of deliberation, to make the permanent move to the south of France for their retirement.

June 2022

Richard and Jane found their dream property to retire in the south of France for a property value of €300,000

28t^h June 2022

They were introduced to Moneycorp to undertake a free currency consultation to discuss the options available to them to facilitate the purchase of Euros required ready for the completion of funds on the 28^th September.

7^h July 2022

Richard and Jane opened their free, no obligation, Moneycorp account and paid the deposit of €30,000 using a spot contract at a GBP/EUR rate of 1.17. They then discussed their options with their dedicated market specialist and requested they informed them once the market reached 1.19.

28^st July 2022

Richard and Jane were notified that the exchange rate had reached 1.19 and decided to use utilise a forward contract to buy their remaining €270,000. This means their purchase prices was fixed regardless of the market.

July 28^th  September 28^th

Over the next few months, there was a lot of volatility in the market due to political uncertainty, interest rates and global recessions.

28 September 2022

On the day of completion, Richard and Jane setup their payment to the Notaries. Regardless of the rate of 1.12 on the day of completion, Richard and Jane had already bought their Euros at a better rate of exchange.

Considerations

The price of the property in full was €300,000 with a 10% deposit.

If Richard and Jane had bought their Euros at the time of their deposit, it would have cost them;

@1.17 = £256,410

If Richard and Jane had bought their Euros on the day of their completion, it would have cost them;

@1.12 = £267,857

However…. Richard and Jane bought their currency using a forward contract at a better rate of exchange costing them;

@1.19 = £252,100

As a result, Richard and Jane saved themselves at least £15,757 over their purchase period.

Foreign exchange is a world of regrets, why? Because the exchange rate will continue moving after you have exchange your funds and not always in the direction you were expecting.

1. Get familiar with the rate and currency tools available –even before you find your property. This will help you to define your budget and feel more confident when you start viewing properties. You can get free guidance at this stage.
2. Make a note of the exchange rate when you make an offer. This will give you a benchmark to help you make decisions later on and will help you define a range of a low and a high which will serve you as a reference and help you decide when a rate is good for you.
3. At the time of making the payment for the deposit have another look at the rate. At this point you are looking to remove risk and make sure you buy within budget.
4. Discuss with your market specialist to decipher a plan that is appropriate to you. There are many options, such as forward contracts and market orders, to protect your funds from negative fluctuations and remove any risk from your purchase.
5. There is no right or wrong decision. The way you decide to exchange your funds will depend on your budget, your attitude to risk and ultimately, your unique circumstances