October 04, 2022

Michael Bailey

Strong dollar attracting Americans out of U.S real estate

More and more Americans are now getting ready to transfer money from USA as the strong dollar fuels a boom in US investors buying up property in Europe. In this post we will examine this a bit closer and also look at how to save money when transferring money from US bank accounts to Europe.

As we enter the fall of 2022, the world currency markets appear to be verging on entering some truly unprecedented territory. The US dollar has long recovered from its pandemic slump and appears steady at a 2 decade high while the world’s other major currencies enter freefall. Indeed, earlier this summer the US dollar achieved parity with the Euro and with the British Pound in an apparently self imposed death spiral, the once unthinkable notion of one to one parity with Sterling may be a matter of weeks away from actually manifesting.

What this all means is that some Americans are feeling rather flush right now. The strong Dollar to Euro/Pound ratio has inspired increasing numbers of American tourists to take full advantage of the exchange rate and take vacations to the UK or mainland Europe.

Meanwhile, American investors are also beginning to pay ever greater attention to the opportunities currently available across the pond either in terms of stocks, bonds or real estate. Statistically, US investment in Europe has seen real terms year on year increases for decades, but took a considerable leap from $3.63 trillion in 2020 to $3.98 trillion in 2021. While the figures for 2022 are not available yet, there is every earlier indication that the figure will smash through the $4.3 trillion mark.

For example, Sotheby’s International has reported that Americans making inquiries for property in Greece increased by 40% in the second quarter of 2022 as capital rich US citizens scramble to take full advantage of the strong Dollar vs weak Euro dynamic.

The enhanced American interest in the European property market however, is in stark contrast to the dwindling interest in their own. After 12 months of rapid house price booms   (climaxing in an average increase of 18% in June 2021)  the August figures indicate that the market is finally cooling off. This is doubtless a result of the FED’s hawkish approach to controlling inflation – interest rates have increased 3 times this year and are expected to hit 4.5% by the end of 2022 – which in turn is driving up the cost of mortgages and deterring or outright disqualifying prospective buyers.

Both the UK and the Eurozone (at least most of it) are pretty relaxed about allowing foreigners and even non-domiciles to buy up properties. While any non-resident will struggle to get a mortgage from a European bank, a US investor with cash will find that the current exchange rate means there are some serious bargains to be had right now.

Logistics of Transferring Money From US Bank Accounts to Europe

One of the challenges facing buyers though is how best to move their Dollars across the Atlantic. When the time comes to pay for a property investment, the buyer will of course need to change their Dollars into Euros or Pounds and transfer them to a British or European bank.

What It Costs To Transfer Money From USA

Relying on the banks to do this however can prove to be very expensive as banks charge not only levy transaction fees, but also use foreign exchange rates which are prejudicial to their customers. In short, anybody sending money from the US to Europe using their bank can expect to lose 5% of the transaction in fees and costs.

However, savvy investors know that money transfer companies are a lot better than U.S banks and can help to save some serious bucks when transferring large sums of money. This is because money transfer specialists charge much lower transaction/processing fees and also offer much more competitive foreign exchange rates. Of course, money transfer providers are not charities and do take fees but customers can expect to lose around 1 – 1.5% of the value of the transaction as opposed to 5%

If you are looking to make a money transfer to France or Italy,  a money transfer to Portugal, Greece, or a money transfer to Spain, bear in mind that the costs for all of these destinations will be identical as they are all in the Eurozone. The UK on the other hand, is not and as such, the costs and fees will vary.

Final Thoughts

It’s impossible to predict what will happen next. While things may stay as they are for some time, it is equally possible that the Dollar will begin to come down and that the Euro and Pound will begin a steady recovery in the weeks to come. For now though, Americans are making the most of the situation and as such, looking for cost effective ways to  transfer money from USA. If you are fortunate enough to be looking for property in Europe, remember that transferring money from US bank accounts to Europe is cheaper with money transfer specialists than with the banks whether you are making a money transfer to France, Portugal or Spain. Oh, and we hear that there are gorgeous villas to be had in Madeira.