What Happens to a Country's Real Estate Prices When Its Currency Devalues?

Chris at Hauseit (https://www.hauseit.com) goes over what happens to a country's property prices when its currency becomes devalued. When a country's currency depreciates vs other currencies, do real estate prices in the country go up or down?

Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://www.hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Established 2014.
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When a country's currency experiences a devaluation vs other major currencies, the prices of everything sold by the country, including its real estate, becomes cheaper for foreigners holding stronger currencies. Thus, foreign buyers typically show up and become a bigger percentage of the buyers.

Furthermore, when a country's currency depreciates, the real estate market tends to experience a decline in price at the same time. That's because as a country's currency depreciates, imports become more expensive, thus fueling inflation. Inflation is bad for rental property because even though landlords can raise rents, they also experience increasing costs on all fronts. Therefore, high inflation can severely decrease the attractiveness of an asset experience large cost increases.

Furthermore, high inflation will typically cause the country's central bank to raise interest rates in order to combat inflation. When it does so, interest rates on a variety of loans such as real estate mortgages will also reset higher. This is especially the case for adjustable rate mortgages, and when interest expense increases you'll tend to see more defaults and foreclosures. This of course also has a negative effect on property prices.

Therefore, a currency devaluation is almost always bad for holders of real estate in that currency, and foreign buyers with greater purchasing power in stronger, more stable currencies might find interesting opportunities during times like this to snag a nice vacation home!
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Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://www.hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Established 2014.

Hauseit Group LLC, Licensed Real Estate Broker
Tel: +1 (888) 494-8258
Email: [email protected]
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