Money column
The role of foreign exchange when buying a French property, by Mar Bonnin-Palmer
E
xchange rates are constantly fluctuating. This means that when you decide to buy a
property abroad, the real cost of your purchase can change with the rates. Imagine getting to the point of buying your dream property, and the price is different from when you made the offer. It’s the reality of the foreign exchange market – that small changes make big differences when you exchange a large amount of money. That’s why we advocate
for planning your foreign exchange requirements before you even start looking for a property in France. That way, you can be confident that you are prepared and have done everything possible to manage any currency risk. Once you’ve found your
property, there are several points at which you’ll need to think about foreign exchange. But first, you’ll sign a purchase contract, or ‘compromis de vente’ as it’s generally known in France. This is a legally binding commitment to buy the property, and although there’s a 10-day cooling-off period – after that, you’re all in. Your transaction will be
overseen by a notaire, a state- appointed public officer and a qualified solicitor who ensures the purchase is completed correctly. The process will happen in between two and
DID YOU KNOW? In 2022, the £/€ rate
fluctuated between 1.2188 and 1.0843. To put this in
perspective, the difference in price at these rates on a €250,000 property would be more than £25,000!
four stages, depending on how you purchase your property.
PAYING FOR THE PROPERTY After the cooling-off period, the first payment you’ll have to make is the deposit (dépôt de garantie). This is usually around 5-10% of the total value of the property and will be transferred to the notaire overseeing your purchase. It usually takes two to three
months to reach completion. You’ll need to wire the final funds – using your own money or a mortgage – as well as any outstanding fees and taxes directly to your notaire’s account before the day of completion to ensure there are no delays. You’ll then sign the title deeds in the presence of the notaire in France. Because of the time lag
between the deposit and the final payment, this period can be unsettling for buyers because exchange rates can fluctuate significantly. If you’re buying off-plan
(before the property has been built), you’ll have a slightly different payment schedule because you'll pay for the property in three or four instalments. Finalising an off-plan purchase can take up to two years, which means the risk of fluctuating exchange rates is even higher than with standard property purchases. The inherent volatility in
the foreign exchange market means each stage of your purchase represents a financial risk. However, there are a range of tools available to you to help you manage your risk.
CURRENCY TOOLS Spot contract: This is the simplest contract. The price is quoted and booked for
88 FRENCH PROPERTY NEWS: September/October 2023
“There are several points at which you’ll need to think about foreign exchange”
immediate delivery. Buyers will often use this method when they need to make a one-off smaller payment or they only have a limited timeframe to make the payment. The deposit, for example. It’s important to remember,
there is a lot of variance in the market, which means you’ll find different spot rates offered by different providers. Foreign exchange specialists can usually get you a more competitive rate than your bank because of their high trade volumes. They also have access to a larger number of liquidity providers – for
example, at Moneycorp, we find the most competitive rate for our clients from 16 providers. Market orders: These allow
you to set up a target rate. With the help of an expert, you can select the rate you want to target within a specific timeframe, considering what you want to achieve from your transaction and how you expect the market to perform. These are a good tool for buyers who are optimistic that the exchange rate might improve. Stop-loss orders: This tool
allows you to protect your transaction from going below a specific rate. Stop-loss orders
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