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The International Buyer And Currency Exchange – A Predictable Trend?

By Laura McLoughlin

The anticipated report ‘The 2010 NAR Profile of International Home Buying Activity’ has just been released and provides interesting reading. Anyone involved in the real estate market over the past couple of years would probably have been looking to diversify their service offering and marketing efforts given the slow down in the housing market and general economic conditions.

More and more real estate professionals looked globally, recognizing that ‘foreign nationals’ represented a big market share. The National Association of Realtors also recognized the buying power of non-residents and undertook its first research project to better understand this market. The resultant 2006 NAR Profile provided a tremendous amount of information on the foreign buyer, and also gave a plethora of facts and statistics of where clients were coming from, the types of homes they bought, the amount of money they spent, etc. A useful tool for any budding international practitioner. Back then, it was the Britons who topped the table as number one home buyers in Florida, not surprising for anyone living in Florida, especially in the Orlando area. By 2008, the Canadians had topped the table with the UK running a close second. However, according to the new report, spanning the period April 2009 to March 2010, the Canadians are still number one, followed by Mexico then Hong Kong/China, with the Britons running in fourth place.

So why the change?

The global economic conditions are no doubt a factor, the UK and Europe are still trying to claw their way out back to financial security whilst Canada and Mexico are experiencing relative growth. Lack of financing, visa concerns, tax issues are all considerations for international buyers, but does that help explain why some countries have more buyers coming here than others?

Currency exchange rates..a deciding factor?

Interestingly, the Canadian Dollar (CAD), Hong Kong Dollar (HKD) and Mexican Pesos (MXN) all either appreciated or remained constant against the United States Dollar (USD) from April 2009 to March 2010, the same period that NAR conducted their survey. The CAD appreciated more than 20% from $0.78 to parity, the MXN appreciated just under 10% whilst the HKD remained constant. The Great British Pound (GBP) failed to live up to its great expectations, similar to England’s hopes of winning the World Cup, and fell from 1.68 to a low of 1.44. Gone are the days of the GBP trading above 2.00, for now anyway.

The NAR report concluded that ‘it appears that the value of the dollar relative to other currencies is an important factor in influencing the purchasing decision’. I would concur wholeheartedly and go one step further concluding currencies that perform well against the USD over a particular time draws in buyers and visa versa.

So why so important?

For Realtors, it is important to recognize the importance of currency exchange rates because it is the reason clients from other countries buy. For clients, it controls their buying power, which controls the amount of money they have to spend.

It is also important to understand the issues faced by clients who have to not only exchange their currency, but also transfer it here to purchase their piece of US real estate.

Currencies fluctuate

The first issue, as highlighted above, is that currencies fluctuate. Large movements in small amounts of time are not uncommon. These movements will affect the amount of money buyers have to spend.

Exchange rate ‘price’

Most people are not aware that the exchange rate market is the same as any other market, and the price a client pays, that is the ‘exchange rate’ varies depending on the financial institution used to facilitate the exchange and transfer.

Other considerations

Commission charges, transfer times, tracking of funds all can cause problems when trying to make an international payment. For clients, it can cause many a headache in the already unfamiliar process, for realtors it can delay closings or even lose the sale completely.

Moneycorp, Inc., a subsidiary of TTT Moneycorp Limited, is a specialist foreign exchange company helping individuals and clients make international payments. The benefits of our service is that we provide the best exchange rates, fast and efficient transfers and risk management solutions to ensure clients get the best currency exchange and transfer solution. Moneycorp also has a Referring Partner Program designed specifically for Realtors working with international clients. If you would like to find out more about the currency exchange market, the services Moneycorp provides or simply have a related questions, please contact Laura McLoughlin at (407) 352.5890 or visit www.moneycorp.com/us

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