Living in the ‘global village’ of the modern world, international travel is a common and accepted part of everyday life whether for business or private leisure purposes. No far corner of the planet seems to be untouched by the footfall of those pursuing commercial activity - or the intrepid tourist discovering for their first time the history, heritage and cultural treasure of what a new land has to offer.
Although travel may be the common Currency of enlightenment, in reality making these journeys can be frustrating and costly when dealing with boundaries and borders of a different kind – money in its various forms. Travellers Cheques and currencies such as the US dollar are accepted across the world in various countries as a medium of exchange from tourists – but this is not universal and the more you travel the more you encounter unfamiliar currencies, banknotes, coins and rates of exchange. Of course, there is always the ubiquitous credit card which seems to be accepted in the remotest mountain village or island – far away from the major cities yet inextricably linked to the global financial ‘nervous system’ that makes the world go round.
For our casual travelling needs, many of us resort to the Bureau de Change or bank in the local High Street, the airport departure lounge – or the money exchange kiosks we find at our holiday destination. A stroll along Nissi Avenue in agia napa or the seafronts of Larnaca, Paphos or Limassol will bear testimony to the opportunity for ‘comparison Shopping’ when looking to trade your own Currency. One of the great ‘ice breakers’ in striking up a conversation with a fellow traveller is the exchange rate at which you bought the local Currency! For many years, this has been a familiar part of the experience when travelling to cyprus. This will change from 1st January 2008 when the country becomes a fully-fledged member of the Euro zone and the cyprus Pound will have until only 31st January 2008 to remain in circulation. cyprus, along with Malta, will be joining the existing 13 member countries using the Euro as a single Currency.
This means that any Euros you use for trips to countries such as France, Germany, Italy and Greece can be used in cyprus – without the bother or expense of having to exchange British Pounds for Euros, unless you need more of course!
Apart from affecting the casual traveller, exchange rates have an important impact on others needing to transfer Currency. For companies and financial institutions trading in the global economy, the world of international money markets has long been the lifeblood of transnational commerce - but a mystery to most other people!
On a personal level, the movement of larger sums of money invariably takes place when making a major purchase or investment – when buying an apartment or villa for example. cyprus has long been a hot favourite for British people wishing to buy abroad. For many people the climate is healthier and the way of life more relaxed and less stressful than found in the UK.
Exchange rates play a highly significant part in the process of buying and paying for an overseas property (assuming the purchase capital is held in a different base Currency such as British Pounds) and will directly affect the final cost of the property.
Assuming that the vast majority of properties will be priced in the local Currency – Euros as from 1st January 2008 in cyprus – it should be noted that the price of the property is very different to the cost of the property. The “price” of the property will be in the local Currency whereas the “cost” of the property will be how much your own Currency, as the buyer, will be needed to pay for the property. The exchange rate achieved can be a significant factor in minimising the total costs of the transaction.
Exchange rates move frequently - and can do so by large margins. Most rates move by the second - depending on the supply and demand for each Currency. Keeping track of these rapid rate changes needs an in-depth knowledge of the foreign exchange market and hour-by-hour awareness of the trends that drive it.
Rate changes, while less important when buying a small amount of holiday money, can mount up and make a big difference when needing to find a much larger amount to pay for property. For example, for a buyer based in the UK, every 1 cent movement in the Euro (the difference from EUR 1.47 to EUR 1.46 for example) will add or reduce approximately GBP 1,000 to the cost of a property priced at EUR 150,000. Given that the Euro exchange rate moves an average of 3% every month, it is not difficult to see the financial impact that exchange rates can have on an overseas property purchase.
For those permanently living away from the UK, there may be other reasons for transferring Currency abroad – mortgage payments or receiving pensions, for example. So awareness about the pros and cons of Currency transfer is essential if you want to make the most of your money – and avoid the pitfalls of making the wrong decisions.
High street banks have traditionally been the main suppliers of consumer foreign exchange services. However, there are also a growing number of specialist foreign exchange dealers - Currency dealers - providing services to buyers of foreign property. In many cases Currency dealers can provide financial, time and administrative advantages compared to the normal branch of a high street bank.
Due to the highly volatile nature of exchange rates it is also good practice to shop around and find out exactly what standard of service various dealers are offering. That way, you are in the best place to make a considered and informed decision about which dealer is best able to work for you. Do so well in advance of knowing that you need to transfer Currency to buy a property. The simple process of finding out what they offer, how quickly they can respond and what they will charge gives you the freedom to make the right choice. A reputable dealer will be more than willing to explain what they do and how they work with you to get the best deal from the Currency markets.
Contingency planning is key – it costs nothing to register your details and set up an account ready to receive British Pounds for transfer to a cyprus Pounds account – or Euro account from 1st January 2008. Bear in mind that you will need the right Currency for deposits, instalment payments or outright purchase of your property. The process is relatively straightforward and once completed sets you up to receive future transfers of pension payments and other monies.
There are good reasons to consider specialist foreign exchange dealers as an alternative to conventional banks. Specialist brokers tend to focus on this business and have lower overheads and will tend offer more competitive rates for investors changing the larger sums of money involved. In general the more money you convert, the better the rate. Depending on your bank or broker, funds transfer costs between £15 and £40 per transaction. It is advisable to compare the total cost of a Currency exchange deal, as some Currency dealers do not charge a transfer fee while more than making up for this in the exchange rate they quote.
Depending on your personal needs, you can instruct your dealer to secure a rate the moment it changes to a desired level. If your source capital is in the UK, your dealer can place an order to purchase Currency outside London trading hours, which will automatically trigger as soon as the desired rate is achieved. You can study the trend of exchange rate variations – and take your risk in making a decision to go for a particular rate at a given time - but be realistic about the rate you are looking for and be prepared to wait! Considering the savings that can be achieved on a property purchase of substantial value, you can make your calculations and act accordingly.
A facility offered by dealers which is particularly attractive to off-plan investors is the ability to fix an exchange rate – this can be done for up to two years. All you need to do is book an exchange rate and send your dealer a deposit, usually 10% of the contract value. The 90% balance of your Currency contract is payable when you wish to have funds transferred overseas.
By their very nature, it is impossible to predict markets with absolute certainty so foreign Currency dealers are not regulated to give advice. However, many will gladly provide you with information about prevailing market trends and Currency movements. Based on this research, you will find it easier to make your own decision about when to buy. You can pursue the latest Currency charts by visiting the websites of various dealers - or signing up to receive daily or weekly e-mail market updates. The Interbank rate is displayed on the internet and on Ceefax – this is the rate at which banks buy and sell from each other. Many websites feature live Currency charts for major trading transactions, as well as historical exchange rates. For a current quote on the amount you are looking to exchange for your investment, it is always best to call for an individual quotation.
Depending on who you deal through, you can fix an exchange rate on regular overseas payments for a period of between 6 and 24 months, removing the worry caused by fluctuations in the exchange rate over that period of time. You can also arrange direct debit payments each month and transfer your funds directly to the nominated destination account of your choice.
After booking an exchange rate, you will need to transfer funds to your client account. The easiest and quickest way is by CHAPS of BACS; these are different methods the banks use to transfer funds between themselves. Bear in mind that any cheque deposit will have to clear before funds can be sent.
Once the arrangements have been put in place, Currency transfer is a relatively straightforward procedure and should take roughly 2 – 3 days under routine circumstances, although it is always best to check with your dealer on the timelines when you give your instructions. Payments overseas are made easier with an IBAN, (International Bank Account Number), adopted by most countries in Europe, this long alpha numeric code identifies the country, bank, sort code, account number and Currency all in one.
As long as the UK remains outside the Euro zone, there will still be the need to go through the hoop of foreign Currency exchange when buying a villa or apartment in cyprus. Prevailing exchange rates with the Euro from 1st January 2008, transaction costs and timing of the transfer will continue to impact on the actual sum of local Currency received in cyprus from a UK Sterling account. That said, being aware of what you can do to make the most of your money – and its transfer value – is half the battle of getting the deal that’s right for you.
