Buying a house in France can throw up one or two little challenges. There’s the language barrier and there’s the fact that things are done a bit differently. None of that’s surprising and if you do a bit of research and get good advice it should all go fine. One thing that many people overlook is the exchange rate, and that can be a big mistake. Whether you’re buying a French holiday home or a permanent residence, fluctuations in the exchange rate can be a disaster.
It’s an easy thing to let slide with so many other things to consider but if you’re not from a Eurozone country then changes in the exchange rate could potentially steal your house!
Not only that but it can leave you in a nightmare situation where you can’t afford to buy but you’ve signed a contract so it’ll cost you tens of thousands of Euros to get out of it.
Recent fluctuations in the financial situation worldwide should be a lesson to us all. As I write this, in April 2008, we’ve just witnessed a drop in the dollar and the pound of around 20% in four months. If you look at what that does to your holiday money then you’re looking at having a fifth less to spend.
Unpleasant, but no big deal? OK, but now look at what would have happened if you had agreed a French property purchase in December last year. Let’s say for ease of maths you are buying a French house for 200,000 Euros.
Last December, those Euros would have cost you about 252,000 dollars. However, the sale process, getting all the paperwork agreed etc, takes about 12 weeks. During that time the dollar has dropped and now you need to pay for your house.
The nasty truth is you now have to pay 316,000 dollars for the same house - that’s an extra 64,000 dollars! My guess would be that there’s no way you could easily come up with that sort of difference but pulling out of the deal is going to cost you a minimum of 30,000 dollars and that’s if the agent doesn’t sue you for breach of contract.
I’ve given dollars as an example, but much the same thing has happened between the pound and the Euro so you’re not safe if your coming from the UK to buy a French house either.
This isn’t a fantasy situation, this is fact. This is what has happened to the exchange rate in the last three months. Could it happen again? Well those of us who live in France weren’t expecting a drop this big - we’ve been used to a very stable rate for about three years and then bam! So who’s to say it won’t happen again?
The real point here though is that if you’re considering buying property in France it’s something that you need to keep an eye on, not something to gamble on.
When you’re looking at a French house price, are you buying with money you’ve got in the bank? If so, you might want to consider either changing your currency to the Euro or locking in an exchange rate with your bank or one of the currency exchange companies. If you need a mortgage you might want to get it sorted out early in the process and again, getting the money in Euros.
Yes, the exchange rate can go the other way and you could end up with more money than you thought. Are you going to take the risk though? It could cost you your French house.
Buying any property can have its headaches, buying property in France can throw up a few more. Don’t let fluctuations in the exchange rate be one of them.
Jeff Seems is an Englishman living in France. He is author of The French Property Buyer’s Guide which is vital reading for anyone thinking of a buying French property
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