A common conversation we have with foreign investors is whether the euro will be going up or down. We have lost count of the number of English clients we have heard kicking themselves for holding off buying because they thought they would wait for Sterling to get stronger only to have it keep dropping. You cannot control how currency speculation will influence the markets but you can take control of your financial destiny.
Buying a property is a long term investment. If you buy today and next week the euro suddenly drops 0.5% you have not lost anything. It will go up again. Then down again. Then up again. The only point at which it matters is between the point you buy and the point you sell. With prices in Nice going up on average 5% per year since the financial crisis, you will need to wait at least a couple of years for capital appreciation to offset the 7% taxes you paid on purchasing. We cannot predict where the currency will lie in 5 or 10 years time.
The core questions are:
- Is your capital safe?
- Can I make a better return than keeping the money in the bank?
- Is there anything I can do to hedge against currency fluctuations?
The Nice market is very solid. In fact it is nearly the only city in France not to have dropped in price since the start of the global financial crisis. The city is up to 20% cheaper than its neighbours, and prices have not even started to take into account the recent €1bn of infrastructure investment.
You can make a much better return on your capital than the near zero interest banks give. Capital appreciation still outstrips inflation and bank interest, even whilst sitting idle. There is a strong rental demand in Nice and should you rent it out to holiday makers this can double your return on investment. Rental produces approximately a 5% gross annual yield, up to 8% if you grab a bargain, or around 4% if you pick an ultra-safe investment you could sell the next day if needed. The combined ~10% ROI is more significant than minor currency fluctuations.
Can you hedge against currency fluctuations? Some of our cash buyers are taking out euro mortgages. In France you can write off the interest payments against tax on rental income. By taking this route if the euro gets stronger then the relative value of their property goes up, which they can cash out for a profit. If the euro goes down then they can pay off the mortgage in one go and save a lump sum.
Either way we can put you in touch with the right people to help. If you need a mortgage we have contacts in all the Nice banks to introduce you. We can also put you in touch with a currency broker for any large transfers to ensure you get a better exchange rate than using your bank.