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GOING WITH THE FLOW: CURRENCY FLUCTUATIONS LIFT LUXURY INTERNATIONAL PURCHASES
Whether they’re looking for an apartment in London or Tokyo or a Barcelona penthouse, Americans buying property overseas—particularly in Asia and Europe—have benefited for several years from the strength of the U.S. dollar.
While currency fluctuations occur daily and the exchange rate may be slowing international purchases of U.S. real estate, it has also contributed to an increase in American buying power in Europe and Japan, according to experts. Americans’ wanderlust, matched with their buying power, is anticipated to continue to keep global luxury markets thriving.
“In 2022, Portugal Sotheby’s International Realty achieved our best result ever,” says Duarte Marques, new development director, Portugal Sotheby’s International Realty in Lisbon. “About 52% of our clients are of international origin, with Americans leading the way, followed by the British. It’s worth noting that, five years ago, Americans weren’t even in our top five countries for buyers, and now they occupy the first position.”
Over the past two years, the euro has been down 8% compared with the U.S. dollar, and over the past five years it has declined 9%, according to XE.com. That trend shifted during the third quarter of 2023, with the euro up 6% year over year compared with the dollar.
U.S. dollars are a global reserve currency, regarded as a safe investment based on the solidity of the economy and the government. Rising interest rates have contributed to the strength of the dollar since the Federal Reserve began raising rates in March 2022. Rates are expected to remain elevated for the foreseeable future.
Currency fluctuations have been particularly dramatic between the U.S. dollar and the Japanese yen, which has decreased by 25% compared with the U.S. dollar over the past two years and was down 24% over the past five years. Between November 2022 to November 2023, the yen fell 5.6% compared with the dollar. The yen first began its slide compared to the dollar in January 2021 and continues to decline.
“The current weak yen and the strong dollar is a big chance for us,” says Mugi Fukushima, branch manager, List Sotheby’s International Realty, Japan in Ginza, Tokyo. “Most of the new development condominiums are very popular with Japanese buyers, but recently they have increasingly wanted to resell their purchases to overseas clients after their purchase because they can sell for a little more thanks to the weaker yen.”
Cash Buyers and Currency Fluctuations
Given the complexity of buying property in other countries and, in many cases, the limited availability of mortgage financing for foreign buyers, most luxury buyers around the world pay cash. Timing the purchase to a dip in the exchange rate can be nearly impossible, but the general trend of a stronger dollar continues to benefit American buyers.
In Japan, overseas clients must pay cash to buy real estate, Fukushima says. As a result, the country has experienced an overall increase in cash buyers with its influx of foreign buyers.
Marques estimates that 95% of Portugal Sotheby’s International Realty buyers pay cash, but there are some options for financing. “We have strong partnerships with major banks in Portugal to facilitate financing for foreign buyers, including Americans,” Marques says. “Our partnerships also extend to the legal and fiscal sectors, ensuring that we are well-prepared to assist Americans in optimizing their fiscal strategies when investing in Portugal.”
Source: Sotheby's International Realty. |
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