Using The Strong Australian Dollar To Buy Property Overseas

With the Australian dollar reaching a record high against the greenback of US$1.10 on May 5, the time is ripe to consider how you can benefit from the favourable currency exchange rate.

The soaring Australian dollar has buoyed the confidence of Australians entering the overseas property market, and overseas property investment is becoming increasingly attractive. The strength of the Australian dollar against the 'flatness' of many property markets around the world is making it cheaper to buy in foreign property markets than within Australia.

The exchange rate and property prices

When you buy an overseas property, the purchase is made using the national currency of the country in which you are buying. The Australian dollar will be converted into the foreign currency using the current exchange rate. The constant fluctuation of exchange rates means that depending on when you buy, the actual cost of the transaction will differ (the value of and returns on an overseas property will also be determined and swayed by fluctuations in the exchange rate). The current strength of the Australian dollar means that Australians are in the position to make sound and profitable property purchases overseas.

The advantages of buying property overseas

Australian property is some of the most expensive in the world – for many, prohibitively so. Currently, overseas property prices are significantly lower which means that Australians can get much better prices and value for their money when buying a property abroad.

In the French region of Brittany, for example, the average cost of a house is €151,000 (AUD$205,420). This figure is significantly lower than mean Australian house prices. From individuals to corporate investors, a diverse range of Australians can enjoy the benefits of overseas property investments, including rental income, higher yields and a diverse investment portfolio.

Things to consider

A lack of local market knowledge can present a challenge when overseas house-hunting. The help of a local realtor and lawyer can improve your chance of getting the best deal possible on your purchase.

Managing overseas properties can also be difficult. Every country has its own laws and regulations for foreigners buying property. Your research should be thorough to ensure you know the exact costs, taxes and policies you will be facing. That way, you can avoid getting caught up in any legal loopholes.

Also consider who will facilitate the payment of your overseas property – whether that is a bank or an online foreign exchange service. (Remember: If you make money off your property, you will have to declare it with the Australian Taxation Office).

If you’ve dreamed of an Italian villa or your very own Spanish getaway, now is the perfect time to make it a reality. The Australian dollar is at a post-1983 float record high, so you’ll get the best exchange rate when purchasing your overseas dream pad.

Visit Yahoo!7's Currencies Centre or Forex Education Centre for more information.