How the exchange rate may affect your Platja d'Aro property purchase

How the exchange rate may affect your Platja d'Aro property purchase

How the exchange rate may affect your Platja d'Aro property purchase

Are you thinking about buying a Platja d’Aro property this year? If so, you may already be aware that the foreign exchange rate can have a huge impact on the price you pay. After all, if the pound is standing tall against the Eurozone’s common currency, you receive more euros in your Spanish bank account when you transfer money abroad, thereby cutting the cost of buying on the Platja d’Aro.

With this in mind, is sterling set to rocket versus the euro in 2016? Well, no one’s got a crystal ball, but we can at least examine the possibilities, and how these might affect your property purchase.

1. Sterling could fly higher versus the euro, if the UK votes to remain in the European Union, in the referendum on June 23rd.

This is arguably the most likely outcome for this year. Why? Well because, according to both bookies like William Hill, as well as pollsters like ComRes, UK voters will choose to stay in the EU in the vote 5 weeks from now. If this happens, it’s altogether possible that sterling will shoot back up from its current 1.28 against the euro back to 1.43, where it was before prime minister David Cameron announced the referendum date. This is because a Remain vote would remove a massive black cloud from the UK’s economic horizon. Moreover, it’d also cut the cost of buying Platja d’Aro property!

For example, let’s say that you intend to transfer £1,450,000 to Spain, to buy a 6-bedroom villa with a swimming pool in Santa Cristina d’Aro. At an exchange rate of 1.43, you’d receive €2,073,500, or +€217,500 more than at today’s exchange rate.

Now, just think what you could do with those extra euros! You could pay off the legal fees or real estate costs of buying a Platja d’Aro property, for instance. Alternatively, you could use the extra euros to decorate your new villa in Girona however you choose. With all this in mind, it’s very worthwhile keeping an eye out for the referendum result.

2. The pound to euro exchange rate may decline, if the UK shockingly votes to leave the EU, at the referendum.

This would weigh heavily on sterling, because the UK would have voluntarily detached itself from the world’s largest free trade bloc, and cast itself into the blue. In fact, according to financial institutions like Goldman Sachs and JPMorgan, sterling could fall as far as parity against the euro, if UK voters opt for Brexit on June 23rd. Clearly then, there’s a lot of uncertainty about the future now.

With this in mind, if you’d like to protect yourself against the possibility of sterling weakening for when you buy a Platja d’Aro property, you can set up what’s called a forward contract. This locks in today’s exchange rate so that, even if sterling falls after the referendum, you get today’s exchange rate when you transfer money to Spain. In this way, you’re protected for your property purchase!

In brief then, you’re now in a strong position to make the most of the exchange rate when you buy your Platja d’Aro property. Enjoy it!

By Peter Lavelle at foreign exchange broker Pure FX

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