The currency question

A European who bought a chalet in St. Moritz in 2008 has watched it rise in francs and rise again in euros, because the franc has gained more than half against the euro since. A European who bought in London the same year has watched the house rise in pounds and go nowhere in euros. Same continent, same decade, same kind of buyer. The house was only part of the position.

Five currencies on this site

The euro

Seventeen of the twenty-two hotspots. No position for a euro earner; a position for everyone else.

The franc

Zürich and the Engadin. The strongest major currency of the century, which has made Swiss property a currency trade with a chalet attached.

The pound

London. Weaker against the euro than in 2014 by roughly a fifth, which is why prime London is cheaper for a European today than it was then in real terms, and why the risk runs both ways.

The dollar

Miami and New York. Priced in the world's reserve currency, which a European buyer either wants as a diversification or does not.

The dirham

Dubai. Pegged to the dollar, so a dollar position by another name.

The three prices

A foreign house has three prices in your own currency: the one on the day you buy, the one on every day you hold, because the holding cost is paid in the local currency, and the one on the day you sell, which is the only one that matters for the return. A ten per cent move between purchase and sale is worth as much as a year of appreciation, in either direction.

+10%

A move of the local currency against yours: the house is worth a tenth more, the holding cost a tenth more, the exit a tenth better

−10%

The reverse: cheaper to hold, cheaper to buy the next one, and a tenth of the return gone at exit

0.5 to 1.5%

The annual cost of hedging a large currency position for a year, depending on the pair and the rates

How far a price can move between offer and completion in a currency you do not earn

To hedge or not

Between the offer and completion, almost always. Three months is a long time in a currency, and the desk has seen a Riviera purchase by a dollar buyer cost six per cent more on the day than on the handshake. A forward contract fixes the price of the money for the period and costs the difference in interest rates, which is small.

Over the hold, it depends on what the house is for. A relocator earning in the local currency has no position; the house is in the currency of their life. A seasonal resident or an investor holding a franc chalet or a dollar apartment has a position and should decide, with their banker, whether they want it. Most keep it, because the diversification is part of why they bought abroad. Some hedge the debt instead, borrowing in the local currency against the house so that the asset and the liability move together.

Nobody regrets the hedge between offer and completion. Plenty regret the one they put on for ten years.

A private banker who has done both

The lens

The currency instrument takes your currency, the hotspot and the price, converts at the reference rate fixed at the index date, and shows what a ten per cent move either way does to the price, the annual holding cost and the exit. It does not fetch a rate, because nothing on this site contacts anybody; the rates are printed with their date and you can override them. Use it once before the offer and once before you decide whether to hedge, and then stop looking.

Run the numbers

Currency Lens

A house priced in francs, pounds, dollars or dirhams, seen from your own currency, with the swing.

Open the instrument