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Readers Digest

 

A place in the sun or money in the bank.

01.03.10

By Harvey Jones
 
Our crumbling currency has made life difficult for Britons who have retired in countries such as Spain, but draw their pension in pounds. Hearts may have sunk further when the recession knocked value off their homes. Yet the weak pound could actually make now a great time to sell up.

Exchange rate fluctuation might not seem to matter much when you are picking up holiday spending money at the airport, bit it makes a huge difference when buying or selling property.

Say you bought a two-bedroom villain Spain for €120,000 before the credit crunch when the pound was stable at around €1.44. It would have cost you roughly £83,000 before charges. But at today’s rate of €1.14, €120,000 is worth just over €105,000. Even if the property had fallen in value by 20 percent, you’d still get back more than you paid for it.

But you might want to act sooner rather than later, because currency markets are volatile. “The election is adding to the uncertainty,” says Duncan Higgins of currency specialists Caxton FX, “but if we see a clear winner and the new government offers convincing plans to tackle the deficit, the pound could spring back.”

Meanwhile, the euro is being undermined by problems in countries such as Greece and Spain. “Potential sellers may be wiser to act now in case the euro slides.”

All this shows the risks of living or owning property in one country and drawing your income in another. “You can reduce the risk by sending money through a specialist currency service that allows you to lock into an exchange rate for one or two years,” says Sarah Munro, head of travel services at the Post Office.

Services such as Caxton FX, HiFX, Moneycorp and the Post Office are typically much cheaper than using your local bank to transfer money overseas, a saving that could amount to thousands when shifting sums to buy or sell property. Check your chosen service is regulated by the Financial Services Authority.