Advice from Hugo Investing on currency risk when purchasing property abroad

Purchasing a new property abroad is an exciting time but, like many big financial decisions, it doesn’t come without currency risk. Shifts in exchange rates between different currencies can cause significant changes to the cost of your new property, potentially causing missed opportunities and incurring costs you had not planned for.

It is essential to understand the impact currency and its fluctuations have on purchasing property and how to effectively hedge against it to make sure your purchase is safeguarded – that’s where Hugo Investing comes in.

Using the example of the Swedish Krona, Hugo investing highlights and helps to eliminate the risks when purchasing property abroad.

Envisage that you are a Swedish national thinking about buying a property in Spain, but you are worried about how potential currency fluctuations between the Swedish Krona (SEK) and the Euro (EUR) will affect your purchase. This is where it is critical to understand the impact of currency risks on your purchase and how to effectively hedge against it.

Here’s one example of the many possibilities for hedging your currency risk. Envisage that you have 5,000,000 SEK, which means you can purchase a property worth 444,658.07 EUR. However if, at the start of 2022, you would have been able to buy a property worth 487,804 EUR – that is a huge difference of nearly 10 per cent. This is why it is crucial to understand the importance of hedging your currency risk when considering making such a big financial decision in a foreign country.

Now, visualise that you need to purchase a property in September 2023, for the value of 450,000 EUR. Should the exchange rate continue at the same current rate of 11.28 EURSEK, you would need 5,085,000 SEK to buy the house. If you anticipate the SEK to weaken against the EUR, reaching 12.00, you can see a distinct currency risk in purchasing the property.

If you wanted to transfer your SEK from your Swedish bank account to your Spanish account through the traditional channels, you could face up to 2-3 per cent in fees alone. This can significantly impact and inflate the cost of your property. Sounds scary, right? Don’t worry, with Hugo Investing, hedging against currency risk can be simple and straightforward.

How do I hedge the currency risk?

To reduce your risk in this situation, you may establish an FX position in the EURSEK, which enables you to purchase the position by holding a modest sum of money in a trading account at Hugo called ‘Margin’ in order to hold your position.

Assume you expect the Swedish Krona to fall in value relative to the Euro. You believe that for every Euro, you will require more Swedish Krona. So you decide to acquire a foreign exchange position at a rate of 12.00 EURSEK. This indicates that 12 Swedish Krona are required for every Euro.

If the exchange rate does actually reach 12.00 EURSEK as you predicted, you will end up making money! In this situation, you would earn 316,620 SEK (around 26,355 EUR), because the Swedish Krona you have is now worth more than the Euro. This extra money can be used to purchase your property.

Let’s consider that something unexpected happens and the exchange rate actually drops to 10.00 EURSEK instead of rising to 12.00. In this scenario, you will lose some money with your FX position, however, this will also cause the Swedish Krona to become stronger against the Euro and you won’t need as much Krona to purchase the property.

If the currency rate changes, you can prevent a large financial loss by employing this tactic. Even when currencies change, it helps you maintain the stability of the value you need to purchase the property. Sounds good, right?

How can Hugo Investing help me?

You can protect yourself from currency risk while buying real estate with Hugo. The team provides more than 68,000 various investment solutions in addition to currency hedging to help you achieve your financial objectives.

Don’t let currency risk prevent you from buying the home of your dreams because, with Hugo’s assistance, you can take control of your money and protect your future!

As a regulated broker, Hugo is in partnership with Saxo Bank and offers secure accounts that grant access to three innovative trading platforms.

With a strong track record of supporting investors in Spain for more than 17 years, the team at Hugo’s have a combined expertise of more than 60 years in coaching and training clients to become better investors.

Drop by Hugo’s on the Golden Mile in Marbella, give them a call or send them an email.

Website: Click here

Phone number: From Spain +34 951 56 56 56 from UK +44 203 901 2756 from the Netherlands +31 20 499 0762

Address: Hugo’s Investment Academy, Urbanizacion La Carolina, Edf Aries, local N, Carretera de Cadiz, km. 179, 29602 Marbella

Email: info@hugoinvesting.com

Level up your Forex with Hugo’s exclusive seminar featuring industry expert John J Hardy

Hugo Investing is excited to announce an incredible and rare opportunity to listen to one of the most respected voices in the finance world and head of FX Strategy at Saxo Bank, John Hardy, on June 20.

Guests are encouraged to prepare questions for John, who boasts almost two decades of experience in the financial sector. An expert in the currency market, specialising in delivering strategies and analyses based on fundamental analysis, changes in macroeconomic themes, and technical developments, John’s impressive track record includes numerous accolades for his work over the years.

John’s forex market column is widely read and cited by industry professionals, and he is a regular guest and commentator on popular television networks such as CNBC and Bloomberg.

Details

• Date and time: Tuesday, June 20, 5pm
• Price: Free
• Level: All
• Language: English
• Location: Hugo’s in Marbella

Click here for more information and booking

See you soon at Hugo’s!

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