With good reason do I write this blog about exchange rates today. For the British pound stands at €1.40, its strongest rate for 8 years. And the American dollar stands at €0.95, its strongest rate for 14 years.
If you’re a Frenchman buying lunch in London or New York. Then ouch. If you’re an American or Brit buying apartment in Nice. Then it’s your lucky day.
As a former estate agent, I remember those currency rates well. Some 15 years ago Americans would call long-distance (no Skype in those days) to make a deposit on their credit card. Brits would step off easyJet (another novel invention) as the orange airline expanded its routes to include Liverpool, Newcastle and Bristol.
The Euro that entered circulation on January 1st 2002 was fledgling weak. As Brits and Americans purchased property so prices went up. Local newspaper Nice Matin reported yearly house price inflation of 10%, 12% and 14%. A strong local economy fuelled the boom.
Low interest rates also stoked the fire. In 2002 the European Central Bank rates were nearly 5% (my French mortgage was 7%). By 2006 ECB rates were 2% (I got another mortgage for 4%).
But in 2008 it all went wrong. ECB rates (and French bank lending rates with them) shot up. The currency appreciating in turn. Recession in the US and Britain flattened both currencies. Sterling dropped to a sorry €1.02. The Dollar dropped to €0.62. Suddenly that €200,000 apartment in the South of France didn’t seem so attractive.
Today that’s all changed. Buzzing US and British economies mean their currencies are riding high. As the ECB pursues Quantitative Easing, the currency has dropped like a stone. Foreign buyers should also note that ECB lending rates are down to 0.05%, a historic low, with fabulous deals on the market for high deposit buyers.
And that €200,000 apartment that would have cost £196,100 or $322,600 in 2008? It’s now down to £142,400 or $212,370.
According to economic commentators, it’s a situation that should last. Pressure is on the US Federal Reserve to raise interest rates, which will lead the dollar to appreciate. Quantitative Easing should continue in the Eurozone, which will depreciate the Euro.
A weak Euro also means two things. Firstly, loads of Brits and Americans will rent properties in Nice this year, as it has just gotten a whole lot cheaper for them. Secondly, cheaper Euro exports should support a stronger French economy, which is no bad thing.
Me? I’m going to celebrate with a €2 glass of rosé in Place Garibaldi, which will cost me precisely £1.42 or $2.12.