Weak Dollar Offers Hidden Advantage to Foreign RE Investors
April 28, 2008 by Paul Cauchi commentThe weak US Dollar and the currency advantage that many overseas are enjoying have been talked about in the media particularly in regards to manufacturing and real estate. But a much overlooked phenomenon is not being addressed as often.
When international investors buy US properties and enjoy the double digit discount compared to just a few years ago, they will likely reap the rewards of a stronger US dollar in the future. For example, if a German investor buys US property with an exchange rate of 1.56 euros per US Dollar and sells in 7 years with an exchange rate of 1.25 Euros per US Dollar they will benefit from a weak dollar upon buying and a strengthening dollar when selling. So, even if the property does not increase in value they will make money from the strong dollar when selling. Economists like Serguei Chervachidze at Torto Wheaton Research have written about this phenomenon.
Most economists believe that although the weak dollar might not be temporary, it is likely to strengthen sometime in the not too distant future. Now, with the currency odds in their favor - foreign investors have a reason to love south Florida even more (if that's possible...)
