AS HARD as it may seem to believe, the United Kingdom might be in the very late stages of the Covid-19 pandemic.
Daily cases across the UK hovered around 6,000 in March, marking a dramatic improvement from its peak near 70,000 just a few weeks prior.
As the vaccine rollout continues to progress at an impressive speed, the European tourism industry is slowly reopening. This is particularly good news for UK citizens looking to travel to and from their vacation or second home in Europe.
Coupled with the impressive and somewhat surprising rebound in the British pound, many people are re-examining the prospects of foreign property purchases. The international money transfer specialists are well prepared in 2021 to handle large cross-border transactions.
Covid Update: Travel will resume
Exiting 2020, few if any people expected to leave the United Kingdom anytime soon and visit a foreign country either as a tourist or to stay at their second home. There was a good reason for this to be the case: daily cases worldwide continued to spike while the impact of newly discovered variants was unclear.
Countries worldwide introduced new measures on travel, including the UK’s forced hotel quarantines for all inbound passengers. Such became the norm in other countries worldwide, including Canada and Australia.
Yet so much has changed in a matter of weeks. Amid a sharp improvement in the health situation, UK Prime Minister Boris Johnson laid out a roadmap that ultimately calls for the elimination of most social contact rules in late June.
Meanwhile, Cyprus’ tourism minister Savvas Perdios confirmed vaccinated UK nationals will be free to visit the country without the need to show a negative Covid test. The only entry condition is that the second vaccine has to be administered at least seven days before travel.
Similar talks with Portugal remain underway but the European country’s secretary of state for tourism told the BBC: “I do believe that Portugal will soon allow restriction-free travel, not only for vaccinated people, but those who are immune or who test negative.
“We hope to welcome British tourists from May 17.”
France continues to market itself to UK people as a great place to live beyond the pandemic.
One real estate agent said the French lifestyle coupled with the new reality of remote work means it is more possible than ever to live abroad.
Great news for property ownership
The British pound wasn’t trading so hot in the back half of 2020 as the GBPEUR pair traded below 1.10 and was trending towards parity. Pandemic or no pandemic, a money transfer from the UK to Europe for any reason was looking less attractive by the day.
Nearly coinciding with the vaccine rollout in the UK, the sentiment has certainly changed for the better in early 2021. The best international money transfer firms quoted £1 sterling as of early March at 1.16euros. Granted, to casual observers this may not seem like much of a difference.
But in reality, this is quite notable for large money transfers from UK to Europe as this represents the highest level the pound has traded at in many months. Against the US dollar, the pound traded at multi-year high levels and gave hope for a longer-term and sustainable rally.
What does all of this mean for property owners? It’s simple: this is great news either for those who recently bought property or those looking to do so in the coming weeks or months.
Suppose someone bought the property in Europe in very late 2020 for €500,000. By default of the pound’s appreciation of around 5 per cent, the foreign property is now worth 5 per cent more after factoring in the more favourable foreign exchange rate.
Perspective buyers waiting for a rebound in the pound can also benefit from the superior rates.
An international money transfer of say 400,000 GBP to EUR would yield approximately 464,280euro.
Just a few weeks ago the best international money transfer firms would only be able to exchange the same £400,000 for around 441,066 euros
Guarantee a fixed rate on your international money transfer
Anyone that has plans to purchase real estate abroad or has any other need to transfer money from the UK to Europe should consider taking advantage of an FX forward contract.
The top UK international money transfer specialists are local-based and understand the direct needs and challenges associated with transferring money from the UK to Europe or elsewhere.
The way a forward contract works is simple. A person (or an enterprise) can enter into a contract to buy or sell a currency pair on a future date at a guaranteed rate. Typically, 10 per cent of the contract value is required in advance and the rest is due when the contract matures.
Here is an example:
Suppose a UK resident wants to spend £1million and buy a villa in Italy in six months.
International money transfer agencies are quoting the exchange rate at 1,160,935 euros.
If the British pound loses its current momentum and falls 6 per cent over the six-month period, the same £1million would be worth 1,091,278 euros. The prospect of losing out on roughly 70,000 euros is a risk that most people don’t want to assume.
But a forward contract would guarantee a future exchange rate for the pound, regardless of the actual rate. So, a contract can be taken out between two parties to exchange £1million for an even 1.09million euros in six months.
The downside of a forward contract is if the pound gains in value over the six-month period, the individual would miss out on upside potential. For many people, this is a reasonable proposition as it guarantees no downside risk at the expense of not participating in any financial gains.
Conclusion: Now might be the time to splurge
Investing or purchasing foreign real estate in 2021 is a lot more compelling than it was in 2020.
Some of the uncertainty and confusion around Brexit have been resolved as the separation became official. The COVID-19 pandemic appears to be closer to the end than the beginning and the pound is on the rise.
If not now, then when?