How Can Currency Volatility Impact International Property Purchases?

A sharp fall in the value of the South African rand this year has a lot of people contemplating a move to the rainbow nation and snapping up a property bargain.

But the currency market remains highly volatile in the face of elevated global economic uncertainty and failure to take this into consideration could see you paying over the odds on your property purchase.

ZAR volatility turbocharged in 2020

While the rand’s status as an emerging market currency sees ZAR exchange rates fluctuate wildly at the best of times, the uncertainty stirred up by the coronavirus pandemic has infused greater volatility than ever into the rand this year.
This upheaval has led to significant deviations in the value of the rand from one month to the next, as highlighted by leading Economic Advisor Dr Roelof Botha in his review of August’s currency movements for Currencies Direct: ‘South Africa’s currency continued on its volatile ways during August, but ended the month almost one percent stronger against the US dollar than on 31 July. This gain was not matched by the rand’s performance against other major currencies, with losses against the Euro, the British pound and the Chinese yuan.
‘The volatility was quite pronounced during August, with a depreciation of 5.4% against the dollar between 31 July and 11 August. A combination of dollar weakness and positive market sentiment in the wake of a significant easing of lockdown regulations then led to a pronounced recovery of 6.6% until the end of August.’ There is the potential for more dramatic movement in ZAR exchange rates in the immediate future as well, with the likelihood of additional rate cuts from the South
African Reserve Bank (SARB), and growing evidence of a second wave of global coronavirus infections stoking volatility.

Currency fluctuations and their impact on property purchases

With this in mind, there is a clear risk of the ZAR exchange rate shifting during the often lengthy process of purchasing a property – and this could have a significant impact on your costs.

Fortunately, there are steps you can take to help minimise your exposure to currency volatility.

How can Currencies Direct South Africa help protect your property purchase?
Our currency experts are our biggest asset and will keep you up to date with the latest market movements – essential if you want to move your money at the right time. During periods of heightened uncertainty currency pairs can fluctuate by 20% in days, but our team will give you all the insights you need to make an informed decision.

We also offer a range of services to help ensure you get the best value on your transfers.

A Forward Exchange Contract is the currency world’s version of ‘buy now, pay later’. With a small deposit, we’ll hold the exchange rate for up to six months, giving you peace of mind that the value of your transfer won’t change between making an offer and completing your property transfer.

 

 

If you are still house hunting and have time to hold out for a more favourable rate then you can make use of a Limit Order. Tell us your target exchange rate and we’ll make the transfer for you as soon as that rate is hit. If it gets close, we’ll call you to let you know.

If you need to make a transfer immediately, whether it be to cover legal fees or some other unexpected cost we offer Spot Transfers. Agree your exchange rate, send us the funds and we’ll make sure the funds are in your account within 48 hours.

If you’d like to find out more about safeguarding international payments from currency volatility please get in touch with our team email infosa@currenciesdirect.com or call +27 (0) 21 418 0105.