Property abroad: take advantage of the ailing dollar

published 18 September 2007

Property around the world remains overpriced; but the weakness of the dollar means that for anyone determined to buy a second home, now might be a good time to do so. Not in the US, of course. The weak dollar means that many newspapers are writing about the opportunity to pick up a cheap Florida holiday home, but the US housing market isn't in good shape. The collapse of the subprime mortgage market has led America to experience its fastest house-price slump in 20 years. Prices across the country fell by 3.2% in the second quarter of the year and the data look likely to get worse as the year goes on because of the turmoil in the global financial markets.

But there is still a way for determined property investors to take advantage of the ailing dollar. Several currencies around the world are pegged to the greenback, meaning that these currencies have slipped against the pound too. Although properties are still far from being at bargain levels, a combination of up-and-coming location and dollar-pegged currency can mean an exotic property can be had at a "handy discount", says The Sunday Times. So where are these properties to be found?

The best place to look is in America's back yard. The dollar-linked Eastern Caribbean Dollar is used by eight Caribbean nations, while the Cayman Islands and Belize are also affected by the American currency. In the Caribbean, St Lucia is a good bet for British property investors. As more and more Brits buy second homes there, the number of direct flights is growing. Prices have risen accordingly, but are still 65% lower than on the neighbouring island of Barbados.

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Currently you can buy a property in St Lucia for under £200,000. But properties in the more desirable locations are pricier. Villa Le Palmier in the popular Cap Estate below right is currently on the market for $1.2m. While the fortuitous exchange rate means that translates to around £580,000, it's still far from cheap. A slightly less costly alternative is the island's neighbour, St Vincent. It may be trickier to get to (the airport is still being built) but this means it remains one of the Caribbean's "more attractive investment opportunities", says Caroline White in the Daily Mail. Properties on the island are typically about 50% of the cost of St Lucia.

Another option is Belize. It's the only country in Central America where English is the official language. It offers the white, sandy beaches of the Caribbean alongside world-class diving at a discount to the heady prices of the Caribbean islands. According to The Sunday Times, it is possible to buy a beachfront Belize property for under £250,000. As with the rest of the world, property prices in Belize have been enjoying a boom, but currency weakness allows British investors to escape some of this inflation. Combined with the country's developing tourist industry this means that "getting on the Belize property ladder early could be a good move", says The Mail on Sunday's Oliver Tims.

But a struggling US dollar isn't all good news. "Be careful in those areas of the Caribbean that depend heavily on American tourism," warns Sean Collins in the Daily Mail. As the US economy slumps, luxury holidays will too, which could have a nasty outcome for anyone relying on US tourists for rental income.

If you take advantage of the ailing dollar, do use a specialist foreign-exchange broker, such as HiFX, as they can fix the rate at which you'll pay for up to two years. That will prevent the price of your home rocketing if the dollar recovers while you're in the process of buying.