Currency joy for British homeowners in Euro zone
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28 March 2008
British owners of property in European countries which have adopted the Euro currency have profited from the currency's strong performance against the UK pound over the past few months.
On December 19 2007, the GBP was worth almost Euro 1.40. Three months later, the Euro now stands at around around 1.28. This is a real reduction of 9.4%, which means that homeowners within the Euro zone countries have benefited from an additional 9.4% in capital growth, assuming they plan to sell now to bring their profits back in to the UK.
In contrast, however, properties in Europe are now 9.4% more expensive for British buyers, due to the weakened pound against the Euro.
Editor's comment
The UK pound is currently at one of its lowest-ever values against the euro due to a gloomy economy. As a result, British investors can currently get less property for their money in the Euro zone, as the subsequent loss of value by the UK pound has pushed up the sterling cost of property in the Euro zone.
In contrast, however, should the sterling weaken further against the Euro rate, then a foreign asset such as property in the Euro zone can be considered a hedge against inflation. However, no benefit will be felt until the property is sold and the proceeds repatriated.