How a strong pound may cut the cost of Orihuela Costa property in 2016


Are you thinking about buying a property on the Orihuela Costa this year? If so, you may already know that the exchange rate has a big impact on the price you pay for your property. After all, if the pound comes up trumps against the euro, you get more euros when you transfer money to Spain, cutting the cost of your Orihuela Costa property!

With this in mind, what are the odds that sterling will triumph versus the common currency in 2016? Well clearly, nobody’s got a crystal ball, but we can at least examine the tea leaves, to see what might happen to sterling, and how it could affect you.

Fortunately if you intend to buy a property on the Orihuela Costa in 2016, the most likely outcome is that sterling will rocket higher against the euro. This is because it’s odds on that the UK will vote to Remain in the European Union, in the referendum due to be held in 3 weeks, on June 23rd.

After all, virtually all the polls from respected firms like Ipsos Mori and ComRes suggest that support to Remain in the EU is higher. And if UK voters reject Brexit, this would remove the biggest economic and political risk from the UK’s horizon, thus boosting sterling, and cutting the cost of Orihuela Costa property!

For example, let’s say that the UK rejects Brexit, at the referendum in 3 weeks. In this case, the pound could fly from its current 1.29 versus the euro, all the way back up to 1.43, where it was last November before prime minister David Cameron announced the referendum date.

Now, were you to transfer £94,900 to your Spanish bank account to buy a 2-bedroom bungalow on the Orihuela Costa, an exchange rate of 1.43 would get you €135,700, or +€13,280 more than at today’s rate of 1.29. With this in mind, it’s worthwhile looking out for the referendum result, to see if sterling jumps!

Of course, we can’t ignore the possibility that the polls could be wrong, and the UK may vote to exit the EU in 3 weeks. If you’re at all worried about this possibility for when you buy your property on the Orihuela Costa, what you can do is set up a forward contract now. This fixes today’s exchange rate for you, so that if sterling drops before or after the referendum, you’re protected.

You can transfer your money to Spain at the exchange rate you’ve locked in, meaning you don’t have to worry about exchange rate volatility affecting how much your pay for your Orihuela Costa property.

Given all this, you’re in an excellent position to make the most of the exchange rate when you buy your Orihuela Costa property!

By Peter Lavelle at foreign exchange broker Pure FX