The Impact of Exchange Rates on Real Estate

Over the last few years, exchange rates have continued to fluctuate. With the overarching state of Europe still very much in the balance as Brexit looms, there remains a real possibility that exchange rates could alter further by substantial margins. In doing so, global property investments could be at risk of falling in regards to their valuations. However, the lack of stability could also work in seeing real estate prices soar in the foreseeable future.  We’re going to look at some of the effects that the ever-changing exchange rates are having on the real estate market.
 

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Weakened Markets
In recent times, one of the biggest and most significant factors that have impacted real estate is price fluctuations. Following a period of currency instability, the property market has fluctuated between all-time high and low housing valuations. In particular, Australia, which has enjoyed strong and sustainable real estate prices in previous years, has been affected by various factors, including exchange rate and foreign investment tax alterations.

At the time of writing, one Australian dollar is the equivalent of £0.55 according to data provided by Morningstar for Currency and Coinbase for Cryptocurrency. Moreover, shifting exchange rates can result in total loan repayments changing over time, especially for those seeking to move from the United Kingdom, where the value of the pound is currently unstable.

Rental Issues
Throughout Australia’s eight major cities, each has suffered significant price falls. Within Sydney and Melbourne, the 10.3% and 9% annual valuation reductions were their biggest since ABS began compiling the relative data back in 2003. In turn, this level of fluctuation can have a monumental impact on the number of foreign investors buying into the market. Although currency devaluation is beneficial to property investors when houses are more in demand, it can also have negative implications.

For landlords, the continual adjustments within exchange rates can, rather seriously, leave them in a financially precarious position. Primarily, if a foreign property owner seeks to expand into the ever-popular rental market, they may be at risk of not recouping the full monthly rate. Crucially, if the property is located in an area where the currency has become devalued as a result of exchange rate fluctuations, then the landlord’s income may be significantly reduced once converted.

What Can Assist in Future Decisions and Investments?
 
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Due to the current uncertainty surrounding the real estate sector, having helpful tools available that assist in the decision-making processes of potential future investments are arguably more important than ever before. We can look to other markets for inspiration on how best to make these decisions. Forex signals, for example, are a tool traders can use online to help them make critical decisions regarding their Forex trades. Forex signal services analyse several variable factors before making appropriate suggestions to the trader. Trading properties - like trading on the Forex market, especially for the very first time - can be a highly confusing task. But in both markets, following the relevant signals and indicators, first-time traders can uncover critical advice. Perhaps most straightforwardly, this is done by copying the actions and decisions of more experienced traders.

The current economic climate has resulted in international landlords experiencing unexpected income losses from rental properties. Vitally, market signals can help identify profitable trades before any investments are made. Specifically in the aforementioned Forex signals services, algorithms and technical analysis allow for trends to be predefined and currency movements foretold, meaning that the overall outcome of the signals predicts profitable investments. That's within specific tools designed for the purpose, but the concept is transferrable and it's one that, within markets such as real estate, is increasingly vital as a long-term approach will deliver better results than chasing investment returns.

The Current State of Real Estate and Where it May End Up
In Britain, and as a result of the uncertainty which surrounds Brexit, house prices are rising at their slowest rate annually for seven years. Despite their geographical differences, there are undeniable similarities between both the Australian and UK real estate market. With both suffering price reductions and slow valuation increases over the last few years, the current state of real estate remains deeply affected by the continuously-changing exchange rates.

While many believe that the future of a successful real estate market rests with convenience and transaction automation between buyers and sellers, fluctuating exchange rates may continue to make it increasingly difficult for British investors looking to get into the international market. However, and rather contrastingly, a poll conducted by Experience Invest suggests that a surge of real estate investments may come to fruition after Brexit, with 55% of people putting their plans on hold as they await the conclusion of the political withdrawal.

Real Estate is Potentially Changing for the Better
Despite instability and uncertainty, if reports are to be believed, the real estate market may be about to flourish. Traders may find that keeping an eye on the signals pays off.

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