Learn about the strength of the US dollar and why more Americans are considering buying property overseas.
The global market and the US dollar
Last year was a pivotal year for American homebuyers looking at properties overseas. According to JPMorgan Chase, the U.S. Dollar appreciated over 12% in 2022, hitting a two-decade high in September. JPMorgan further notes that “2022 was a historic year. The U.S. dollar strengthened against nearly every other major currency to levels not seen in decades, as the Federal Reserve (Fed) aggressively hiked interest rates in a bid to combat inflation.” For many Americans, owning a home in an exotic destination, whether a bungalow in a beach town in Costa Rica, a rehabilitated stone house in Montenegro, or an apartment in Dubai, is a retirement dream. With the appreciation of the dollar, that dream can become a reality for many.
Traditionally, purchasing property overseas was thought to only be for the rich and famous. Coldwell Banker recently released their 2022 Trend Report, which found that 92% of high-net-worth Americans actively looked at real estate overseas in 2022. Meanwhile, 67% of survey respondents reported owning residential property outside the U.S. The Travel Channel and HGTV have popularized foreign home ownership and made it more accessible to even middle-class homebuyers. In fact, many American retirees focus on buying a home overseas precisely because it is often easier to retire outside the United States than within it, given the rising cost of living in the States. Even those far away from retirement are finding foreign home ownership appealing, given that so many young professionals today can work remotely. Apartments from Belgrade to Buenos Aires are filled with 20–35-year-olds working remotely and enjoying a more favorable cost of living while making U.S. salaries. Risingrates in the United States are moving the dollar to historic strengths and dramatically increasing the purchasing power of US salaries.
What causes currency appreciation?
The appreciation of a currency refers to an increase in its value compared to other currencies. This can result in a stronger purchasing power for individuals using that currency. One factor influencing appreciation is interest rates. When interest rates in the U.S. are high, it can make investing in the U.S. more attractive, which can lead to an increase in demand for the dollar. This can cause the value of the dollar to increase, making it easier for Americans to buy real estate overseas. Another factor that can affect the appreciation of the dollar is the performance of the US economy. If the economy is performing well, it can lead to an increase in demand for the dollar, which can cause its value to appreciate. This means that Americans will be able to exchange the strong US dollar for more foreign currency. Lastly, the political climate of a country is another factor. Countries in emerging markets tend to be more politically unstable, and this instability translates into decreased demand for their currency - thus weakening its exchange rate with the dollar. The Turkish lira is evidence of this, as the lira lost 41% of its value in 2021 alone.
How does appreciation influence property buying?
When the US dollar appreciates, it means that it can buy more of the local currency in the country where the property is located. This can make it cheaper for Americans to purchase properties overseas. For example, suppose an American is looking to purchase a property in Europe, and the value of the US dollar has appreciated against the euro. In that case, the American will be able to purchase the property for less than they would have if the US dollar had not appreciated. This also has a positive impact on the real estate market in the country where the property is located. As more Americans can afford to purchase properties overseas due to the appreciation of the US dollar, this can lead to increased demand for properties and potentially drive up property values. For many, buying overseas is more than just a retirement solution, but is a serious investment where buyers hope to cash out as local property values increase. As CoStar states, the “U.S. dollar is trading at its highest level in roughly 20 years relative to the euro and other world currencies, according to the Federal Reserve’s Nominal Broad U.S. Dollar Index. That means Americans and U.S.-based companies can buy more overseas than in recent years.” We are seeing a historic, almost once-in-a-lifetime, opportunity to take advantage of the dollar’s strength and purchase property overseas. For some, it is just an irresistible investment opportunity; for others, it may very well be a dream come true.
Kredium can help you finance your property purchase abroad with an international mortgage. We have connections with lenders in over 60 countries and can help you get a personalized mortgage loan that works for you and your budget. Our mortgage calculator can help you plan your finances by estimating your monthly mortgage payments. Register on our website or contact us to get more information about our services.
Also, discover which countries offer the option for residency by investment, or learn about how to get a mortgage in some of the most enticing international locations:
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