Financing International Property: Currency Exchange Tips

Investing in property overseas can diversify your portfolio and secure exciting opportunities. However, managing currency exchange effectively is crucial to keeping your investment cost-efficient. Here’s a quick guide to navigating the process.

Understanding Exchange Rate Fluctuations

Exchange rates are volatile, and even small changes can significantly affect costs. For instance, a 1% shift on a €500,000 property could cost you an extra R100,000.

Tip: Monitor the exchange rates for your target currency, and consider locking in a favourable rate using a Forward Exchange Contract (FEC) with a currency intermediary.

Factor in Additional Costs

Currency exchange is just one part of the financial equation. When buying property abroad, you must also consider:

• Transfer duties or property taxes in the destination country.
• Legal fees for conveyancing or property registration.
• Bank charges for cross-border payments.

Tip: Budget for these costs in advance, and consult local experts in the country where you’re purchasing property.

Plan for Exchange Control Regulations

South Africans are subject to exchange control regulations, including limits on the amount of foreign currency that can be transferred abroad. Currently, individuals can use their annual Single Discretionary Allowance (SDA) of R1 million and Foreign Capital Allowance (FCA) of R10 million, subject to tax clearance.

Special Approval Applications can be made to the SARB for amounts that exceed these allowances. Ensuring compliance with these rules is crucial to avoid delays or penalties.

Tip: Ensure you have the necessary tax clearance certificates and approvals in place before transferring large sums of money abroad.

Hedge Against Currency Risk

If you’re making payments in instalments (e.g., during a construction phase), currency volatility could increase your costs over time. Mitigate this with tools like Forward Exchange Contracts (FECs).

Tip: Ask your intermediary about hedging solutions tailored to your needs.

Time Your Transfers

Timing is key – transfer funds when the rand is strong against your target currency to reduce overall costs.

Tip: Use rate alerts or market insights from your foreign exchange intermediary to optimise transfers.

Partnering with a Trusted Foreign Exchange Intermediary

Navigating international property transactions is easier with a specialist foreign exchange intermediary. They offer better rates than banks, ensure compliance with South Africa’s exchange control rules, and simplify complex processes like repatriating funds and managing payment schedules.

Whether you’re purchasing property abroad or transferring funds, Currency Partners provides tailored solutions to make your transactions efficient and cost-effective.

To speak to an expert in our specialist team, email enquiries@currencypartners.co.za or call us on +27 21 203 0081.