Currency Forward Contracts and Buying Property Overseas

What is a currency forward contract?

If you want to hedge your currency exposure, a currency forward contract is one of the simplest and most accessible ways to do so.

In simple terms a currency forward contract is an agreement between the client and international payment provider (Currency Online Group) to fix a currency exchange rate for a future overseas payment.

It is most common to use a forward contract for a payment due up to 12 months in advance but this can be done for a period of up to 2 years. To lock the rate in a deposit of between 5-10% will be required depending how far in advance the contract needs to be.

Advantages of undertaking a currency forward contract

Setting a forward currency contract allows businesses/individuals to be certain of costs around an international payment when budgeting future expenses.

In turn this mitigates currency risk and protects the company’s bottom line profit or in the case of an individual purchase, the cost of the transaction. With outside factors affecting the currency market daily, fixing a contract eradicates the risk of volatility and allows you to devise a clear financial plan around your overseas payment(s).  

With the future exchange rate locked in it means the price of the contract cannot change for the given date. This means the rate can move resulting in a favourable gain for the client.

Examples of why you would use a forward contract:

Forward contracts can prove particularly useful if you have a transaction coming up that needs to be made overseas and is of sizeable value, such as:

• Overseas property purchase

• Overseas property maintenance

• Overseas wedding

• Relocation to another country

• Regular or phased payments over time (transfer of salary or wages)

Using a forward contract for an overseas property purchase

 Just like buying a property in the UK, obtaining a dwelling overseas does not happen overnight. The process can take some time to complete, especially at this present time as we continue to live through the Covid-19 pandemic.

When buying a property overseas, the purchaser(s) will be working within a budget that they will need to stick to, just like buying back home. However, one major difference between the two scenarios is the potential for fluctuations in exchange rates that will need to be dealt with, over the period of time it takes for the sale to go through, when acquiring property abroad. Taking out these risks means the consumer has piece of mind that costs will not unexpectedly increase due to not accounting for these prospective currency movements. If this was to happen, suddenly the property could become unaffordable, with sleepless nights ahead. Forward contracts can ensure complete control of costs and budget when it comes to knowing how much the cost of the transaction will be by setting the exchange rate for a particular date.

To secure a property overseas a pre-contract, non-refundable deposit is usually required with the remaining balance due once all the legalities are complete. In the case of a new build, completion will be due the home is finally ready to move in. If there are hold ups in the time it takes for the build to complete, this could mean further movements in the exchange rate in that time, that could go against the purchaser.

Let’s say for example you are due to pay the balance on a property purchase 6 months from now of €450,000. If you buy the currency forward contract today (as of August 3^rd 2021) at a rate of 1.166, you would be required to pay a 5% deposit (€22,500), with the remainder being paid before the end of the contract. In setting this exchange rate you know that the remaining 95% of the deal will cost £366,638. If you decided not to use a forward contract, come the day of completion you would make the international payment using what is known as the spot rate (rate on the day). If in that time the Euro had strengthened and the exchange rate had dropped to say 1.12 the remaining balance due would cost £381,696. That is an increase of £15,058. You can see from this illustration as to why it is important to protect yourself from this kind of volatility and why forward contracts are a sensible approach when it comes to buying property overseas.

Our partnership with Expert Villas

We have teamed up with a leader in the property sector in Spain and beyond to provide our first-class international payment service to all of their clients. Expert Villas currently has over 80,000 properties listed on their website from all major estate agents in Spain and the Islands. In addition to this Expert Villas has built up a business directory providing complete assistance when it comes to buying, selling and moving overseas.

With our expert knowledge of all things, currency, and Expert Villas in all things property you are sure to benefit all round when it comes to buying, selling or renting an overseas property in Spain.

How to arrange and agree a currency forward contract with Currency Online Group

If you feel a currency forward contract is best suited to your overseas property purchase, then the process could not be simpler. The first thing is to open an account with Currency Online Group.

You can either follow the link www.currencyonlinegroup.com/international-payment or if you would prefer some assistance, you can contact our professional International Payments Team on 0208 050 1546

A dedicated account manager will guide you through the process and discuss what the best option is in regards to your forward contract and fixing the exchange rate, based on your circumstance. While forward contracts prove highly popular when it comes to overseas property purchase, there are other FX solutions available that the team would be happy to go through at the same time.

Benefits of making your international payments with Currency Online Group:

• No Fees or Charges

• Fully FCA Authorised

• Bank beating exchange rates

• Dedicated team providing a personalised service

• Access to online platform 24/7

© Currency Online Group

3^rd August 2021

On July 19^th 2021, Croatia was placed on the UK’s green ‘watch list’, meaning those passengers returning from their trip would avoid isolation.

Like with all countries that are categorised according to the UK’s current travel traffic light system, we must remember to check the entry requirements of the country in question, as each individual one has its on set of rules for those travellers from the United Kingdom.

Entry requirements into Croatia for UK travellers

UK nationals travelling to Croatia must present one of the following:

·       a negative COVID-19 private antigen test not older than 48 hours

·       OR a negative PCR test result not older than 72 hours

·       OR proof of vaccination

·       OR a doctor’s certificate of recovery following a positive COVID-19 test result between 11 and 180 days prior

Children under 12 are exempt from the entry requirements above if travelling with an adult that meets one of the criteria.

If you fail to present one of the documents, on arrival, and are not exempt, you will be required to undertake a rapid antigen / PCR test and placed into isolation until a negative result is confirmed. If you decide to take the rapid antigen test and are planning to stay in Croatia for more than 10 days you will be required to repeat the test again after the 10 days expires.

In addition to producing test results / vaccination status passengers are also required to complete an online entry form

In addition, it is recommended that you carry the details of your accommodation booking / ownership of holiday home/boat. If you are arriving in Croatia on business, again proof of business meeting / invitation is advised at this time.

Demonstrating your COVID-19 vaccination status

To gain entry into Croatia you will need to provide certificate of a two-dose vaccine course from the following providers:

·       Pfizer

·       Moderna

·       AstraZeneca

·       Gamaleya

·       Sinopharm

Alternatively, receipt of one dose of Johnson & Johnson & Janssen will be accepted.

In both cases vaccination must have completed 14 days prior to arriving in Croatia.

Croatia will accept the UK’s solutions to demonstrate your COVID vaccination status.

Please note that your NHS vaccination card will not be accepted as proof of vaccination status.

Where to visit in Croatia?

Here we look at some tips and facts ahead of your trip to the Adriatic.

Fast becoming one of the most desired places to visit in Europe, Croatia is sat at the crossroads of Central and Southeast Europe, on the Adriatic Sea.

With stunning walled cities, delicious local cuisine, and an extraordinarily beautiful coastline, Croatia is sure to dazzle its visitors.

CROATIA’S CITIES

Dubrovnik

Arguably Croatia’s most popular attraction to visit, Dubrovnik is a UNESCO World Heritage Site. Despite being relentlessly shelled in the 1990s during Croatia’s Homeland War, its mighty walls, sturdy towers, medieval monasteries, baroque churches, graceful squares and fascinating residential quarters all look magnificent again. For the ultimate view of the city, take the cable car up Srd to appreciate the amazing back drop the city has to offer. Alternatively, for all you die-hard Game of Thrones fans, take a themed tour of the city to take in the sights.

Zagreb

Zagreb is the capital and largest city in Croatia. It is also called the city of museums as there are more of them per square foot than any other city in the world. Having said that there is more to do than just browse around these historical places of interest. With a combination of small traditional shops, larger contemporary boutiques, markets and malls, it provides something for everyone. Take in the city surroundings at one of the many cafes or enjoy some of the delicious local cuisine on offer. Not quite on the same scale as the London Eye, the Zagreb Eye is an observation deck located on the 16^th floor of a skyscraper situated in the corner of the main square to give a full overview of the terracotta rooftops over the city.

Hvar

The 4^th largest of Croatia’s islands, Hvar has a growing reputation of being the more upmarket destination in the country. Visited by many celebrities, this island benefits from over 2800 hours of sunshine making it popular with those looking for that sun drenched break. There is also the bonus that local hoteliers will give you a reduction on your stay if you have more than 4 hours rain a day and if it snows, your stay is free! This is how confident the locals are in the weather here!

In its 20^th anniversary, Carpe Diem is far and out the night hotspot of Hvar, popular with the rich and famous. Dance the night away here while enjoying a cocktail or 2!

The National Parks

Almost 10% of Croatia is made up of its national parks, offering spectacular waterfalls and luscious forests to explore. Listed as a UNESCO World Heritage site, Plitvice National Park is home to 16, interconnected lakes, famous for their breath-taking colours.

Looking for something more active? Head to Mljet National Park for kayaking, hiking, and swimming set to a backdrop of stunning scenery.

HOW TO GET TO CROATIA

Flights to Croatia are offered all year round, with the budget airlines in the summer months offering a wide selection of flights to both Zagreb & Dubrovnik. Flight times from London to Dubrovnik are around 2 hrs 40mins, from Manchester just under 3hrs. Head over to Skyscanner  or Jetcost to do a comparison on the best flights available.

There is the option to reach Croatia via ferry/catamaran from Italy, if needed.

HOTEL RECOMMENDATION

Hotel Esplanade, Zagreb - Built in 1925 as a suitably glamorous stopover for passengers on the Orient Express, the five-star Esplanade is unquestionably Zagreb’s most upmarket hotel. Restored to its fabulous former glory in 2004, it offers a level of opulence you’ll find nowhere else in Croatia.

Prices start from £109 per night for room only.

Head over to Trivago to compare the best prices available on this hotel

Which Currency?

The national currency of Croatia is the Croatian Kuna, sub-divided into 100 Lipa.

One pound is currently worth 8.4997 Kuna (as @ 21st July 2021  Currency Online Group)

Your money will go a long way in Croatia, another reason it proves a popular city break destination.

Head over to Croatia Wise for more insight into the prices per city visited within the country.

For the best rates on your Croatian Kuna head over to www.currencyonlinegroup.com. We offer free next day delivery on orders over £750 (order by 12pm). Your currency is delivered to your door via Royal Mail Special Delivery.

Prefer to go cashless? Currency Online Group offers their multi-currency card and app which allows you to take complete control of your currency conversion with the click of a button. Load you card up with GBP and convert to your required currency using live rates.

Used all the funds on the card? … no problem just instantly top-up via the app.

Currency Online Group’s multi-currency card is accepted free of charge at all Mastercard locations worldwide.

© Currency Online Group

21^st July 2021