How buying in a different currency can affect the value of a property overseas

A key benefit of buying property overseas for North Americans is the strength of the US Dollar and Canadian Dollar against other currencies, especially those of developing countries. This gives you  much greater purchasing power in those countries where properties are traded in the local currency. This is because many foreign currencies have lost (am lot of value) over the last few months, years and sometimes even decades.

Also, when a currency has dropped dramatically, in absolute terms and/or by historic standards, the odds that it can go down even further is substantially reduced. By contrast, there is a fair chance that it explodes back higher when the factors that caused the dramatic drop start to disappear.

As an example, around ten years ago, I was looking at real estate in the Brazilian beach city of Fortaleza. Fortaleza is one of Brazil’s largest cities and its number one destination for domestic tourism. I looked at some pre-construction projects on the city’s main boardwalk. A typical sea-view unit was priced at 412,500 Brazilian Reais (BRL) at the time. At the exchange rate of the time, 1.65 BRL / USD, that came down to USD 250,000. Since then, those units have more than tripled in value to BRL 1,350,000. However, the price has actually decreased to 235,000 when expressed in USD. This is because the BRL has dropped from 1.65 to an all-time low of 5.74 against the USD over that period; the BRL has lost an astounding 71% of its value! This has made Brazilian real estate extremely affordable to Americans and other foreigners.

As bad as it is to suffer a 71% currency loss, the person who bought 10 years ago in that example incredibly hardly lost any money. The great news is that, if you buy a property in Brazil today and the BRL reverts back to its value from 10 years ago, the value of a property could triple in USD, even if the market stays flat. However, if property prices continue to rise (which is more likely) at the same pace as over the last 10 years, the value of a property translated in USD would increase tenfold! But what if the BRL falls another 71% you might ask. While this is practically impossible (as a currency can’t go to 0), we just saw that you could still make money thanks to price appreciation.

This is basically a situation in which you almost can’t lose! And it’s pretty much the same story in many other countries with desirable properties. For example, over the last 10 years, the Colombian peso has lost 52% of its value against the USD while the Turkish lira has lost 83%.

How buying in a different currency can affect the value of a property overseas

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