Investors follow currency opportunities

Investors follow currency opportunitiesKnight Frank’s Currency Matters 2014 report, which examines the impact of currency movements on luxury residential markets around the world, shows buyers are increasingly motivated by the opportunities offered by currency movements.Knight Frank’s Global Currency Monitor, the results of which appear in the report, looks at the performance of 30 prime residential city markets and 30 currencies, and selects different time frames to show which buyer nationalities have experienced the strongest and weakest returns. The results reveal how investments using Australian currency have fared depending on place and time.The monitor reveals the relative rate of return offered to different buyer nationalities had they invested in prime London 12 months ago (March 2013). The pound has strengthened over the past year, so there are few non-sterling buyers for whom prices in central London have appreciated at a slower rate than for purchasers using sterling. An investor buying prime London property using Australian dollars 12 months ago would have seen their asset appreciate by 32.5 per cent. The same buyer looking to buy now would be faced with a comparatively more expensive investment as a result of the strengthening pound.However, an investor buying a prime Hong Kong property using Australian dollars five years ago would have witnessed relatively poor appreciation in value of their asset. Prime prices rose by 67.9 per cent in the five years to March 2014, but an Australian buyer would only pay 25.6 per cent more than in 2009 owing to the strength of the Australian dollar.In addition to determining winners and losers in the overseas property market game, the Currency Matters 2014 report shows the currency trends to watch. It forecasts that recent volatility will remain a constant, but predicts the consequences of certain currency movements.If the Chinese yuan is devalued, for example, the report predicts that Chinese buyers are unlikely to be as active in the international property market as they have been. And if, as expected, the US dollar continues to rise, demand for prime residential property in markets favoured by American buyers, such as the Caribbean, Italy and Ireland, may increase. As for the euro, the report predicts that a weakening of the currency will prompt foreign buyers who retreated from many second home markets post 2009 to return.To download the report, go to: http://my.knightfrank.com.au/research-reports/currency-matters.aspx