Description
The ascendance of the U.S. dollar over the past ten years has traced a trajectory of crests and troughs, punctuated by instances of notable deviation. Nevertheless, excluding these exceptional moments, the currency exchange rates with the nations where Americans predominantly purchase properties have not sufficiently tipped in favor of the dollar to deem it a principal consideration.
In contrast, the motivations propelling American interests in international havens such as Europe, Dubai, and the Caribbean seem to orbit taxation considerations, potential for asset growth, lifestyle quality, and the allure of amenities, as noted by industry connoisseurs.
“Certainly, when individuals yearn to procure a Tuscan villa or pursue an Adriatic adventure, the sway of currency seldom drives their resolve,” posits Jonathan Woloshin of UBS Investments. In the broader tableau of American international property acquisition, reasons abound, with currency considerations often falling lower in the hierarchy of decision-making factors.
On the fringe, oscillations in currency rates might wield minute influences—endowing buyers with slender margins of flexibility in pricing, or perhaps jostling the timing of a transaction, as Woloshin alludes to.
The latter cycle witnessed the U.S. dollar peak in fortitude against stalwarts such as the euro and the sterling in the fall of 2022, momentarily arriving at parity with the euro before re-aligning with a five-year benchmark. As recorded on July 17, one United States dollar corresponds to £0.77 and €0.92, hovering within a 2% vicinity of the quinquennial norm for each currency barometer.
In a paradoxical twist, the U.S. dollar exhibited far starker fluctuations against currencies of the global expanse that do not represent significant property markets for affluent American investors, with the Israeli shekel, South Korean won, and New Zealand dollar signaling stark departures, especially in the face of the precipitous dive of the Japanese yen.
“In the arena of key currencies, the yen stands as the pinnacle of the dollar’s potency, yet it does not translate to a substantial marketplace for U.S. investors,” Woloshin remarks.
A retrospective journey through the last decade reveals a sizable shift of the dollar relative to the pound and the euro. A case in point: in 2014, a £1 million domicile in London demanded an outlay of US$1.65 million, a stark contrast to today’s more modest $1.3 million. Correspondingly, a dwelling priced at €1 million carried a tag of $1.32 million in yesteryears, compared to the current $1.1 million valuation.
Beyond mere exchange rates, however, the robust state of the American economy, augmented by a searing housing market, has guided many individuals of substantial wealth to seek property across borders, as holiday retreats, prudent investments, or vehicles for diversification.
In the United Kingdom, particularly within the sphere of ultra-luxury, American prospective purchasers have pivoted towards both permanent residences and pied-a-terre apartments, illuminates Paul Finch of Beauchamp Estates. “The sterling duration of the U.S. dollar’s strength has been instrumental,” he states, “and it’s this consistency that has burgeoned the American presence in the London property scene, deviating from the erstwhile norm where statesiders favored rentals upon arrival in the U.K.”
A pandemic-born migration away from metropolises like New York and San Francisco has also fed into this trend. “We’ve observed West Coast tech magnates transplanting their enterprises and teams, signaling a notable shift,” Finch adds.
The advent of an unprecedented surge in travel and remote work post-pandemic has also cast light on newly favored locales. Portugal’s charm, the French Riviera’s allure, and the Spanish Balearic Islands’ welcome have not gone unnoticed.
“It’s striking, the American lexicon emanating from the eateries as one strolls by,” remarks Gary Hobson, an Enger & Volkers representative in north Mallorca. Indeed, a 58% surge in stateside inquiries in 2024 over the prior year signals newfound American interest in markets traditionally dominated by British and German constituents. Hobson cites closing his inaugural transactions with Americans last year following a two-decade dry spell.
Echoing this sentiment, Hans Lenz of Engels & Volkers accentuates the burgeoned American fascination with Mallorca, a spike in interest perhaps propelled by heightened tourism.
The dollar’s performance against the euro may have greased the wheels leading to these Mediterranean destinations’ newfound favor. “It is astonishing, the number of Americans testing the waters of the rental markets here,” Hobson notes, adding that accommodation costs rack in notably lower compared to stateside prices.
Meanwhile, the French Riviera has witnessed a price swell of 20% between 2019 and 2024, energized by American acquisitions, according to Beauchamp Estates.
In the distant sands of Dubai, currency dynamics adopt a different narrative, with the dirham’s peg to the U.S. dollar fostering a luxury apartment buying spree among the globe’s wealthiest echelons. As chronicled by a recent Knight Frank report, more than 400 luxury homes exceeded the US$10 million benchmark in Dubai in 2023, continuing robustly into the current year.
Dubai’s fiscal trajectory has mirrored America’s aggressive interest rate spikes, impacting the property market’s financing fabric. Yet, this has scarcely tempered the fervor of sales or construction; a Knight Frank survey indicates that a staggering 87% of first-quarter sales involved liquid capital.
“The transformative dynamic in this cycle lies in the buyer profiles,” avers Faisal Durrani of Knight Frank MENA. Ownership now leans more towards personal use, moving away from speculative gambits.
The ongoing surge in demand and an ambitious roster of impending condo projects catalyze certain investments. With residential prices augmenting by 7% overall in the first quarter, those figures soar beyond 18% within Dubai’s prime districts.
While American purchasers might not monopolize the Dubai real estate market, fluctuations in the American economy showcase their ripple effects globally.
“The specter of an economic deceleration looms as the predominant hazard,” says Durrani, underlining Dubai’s global relevance. “Whatever tremors occur elsewhere will invariably be felt in our quarters.”
