By Lee Harrison
The dollar is strong right now, and it’s giving dollar-wielding property buyers a big advantage when buying abroad. Simply put, properties in many countries have gotten dramatically cheaper, in dollar terms, thanks to favorable exchange rates.
Everyone knows that the dollar runs in cycles. And many experts, including The Economist, agree that the dollar is currently overvalued against most of the world’s major currencies. So the window of opportunity to get a “currency discount” on your dream home abroad will be limited, until the dollar starts its next downward trend.
Let’s compare the five most heavily discounted property markets in mid-2019, pointing out some advantages and disadvantages of each one.
My baseline reference exchange rate is January 1, 2013, compared to July 9, 2019.
#1 Brazil: One step beyond Latin America
Currency: Brazilian Real (BRL)
Exchange Rate: R$3.80 per USD
Currency exchange controls: Yes
Increase in buying power: 85%Brazil is exciting, romantic and diverse. I like to think of it as being “one step beyond Latin America”, as its culture and language are just a bit more unfamiliar and exotic to North Americans.
Brazil’s thousands of miles of beautiful beaches extend through a wide range of climates, from tropical to temperate, seasonal environments. Brazil is also culturally diverse, from its German regions and wine country in the south, to its French, African, and Dutch influences in the north.
And in my experience as a Brazilian homeowner, the Brazilian people turned out to be just as warm, friendly, and fun-loving as the stereotypes would have you believe.
Brazil’s downsides: Most notable are its currency controls, which mean government declarations when moving money across borders, and the inability to use dollars or hold dollar-denominated accounts within Brazil. It’s not a difficult process, but it’s one you can’t shortcut.
It’s an exciting time to invest in Brazil. Their economy has faltered in recent years, so you stand to gain twofold… from the recovery of the economy as well as the eventual rebound of the currency. When the recovery comes, the economy should help to raise prices in reals… while the recovering real should further raise the value of your investment in dollar terms.
#2 Colombia: A big currency discount with good upside potential
Currency: Colombian Peso (COP)
Exchange Rate: COP$3217 per USD
Currency exchange controls: Yes
Increase in buying power: 83%
Medellín, Colombia offers the best city-living I’ve found in the Americas, with weather that hits a perfect 78 degrees all year long. Its El Poblado neighborhood is safe, clean and attractive, with shady streets, upscale shopping, and more restaurants and cafes than you could experience in a lifetime. The city also offers a rich cultural scene, from countless open-air festivals to orchestra and theater. And it’s all just three hours from Miami.
Colombia still suffers from the negative stereotypes left over from the days of Pablo Escobar and the Medellín Cartel… days that ended 25 years ago. This bit of ignorance—aided by the Narcos series on Netflix—has resulted in some of the most undervalued markets you’ll find anywhere.
You can gain in two ways in Colombia: You can continue to benefit from the disappearing stereotype, as Colombia becomes increasingly mainstream… prices have been rising rapidly as people forget the old stories. Plus, you could profit from the currency’s rebound.
Colombia’s downsides: As with Brazil, they have currency controls. So you won’t have dollar bank accounts or be able to spend dollars in Colombia. The required declarations are easy; when transferring internationally, I do them myself in a few minutes.
With these minor drawbacks aside, I believe that Medellín, Colombia is the best value in Latin America for a sophisticated, elegant lifestyle… especially at today’s exchange rate.
#3 Mexico: Still the first choice for Americans and Canadians
Currency: Mexican Peso (MXN)
Exchange Rate: MXN$19.15 per USD
Currency exchange controls: No
Increase in buying power: 51%
Mexico is still the #1 overseas destination for Americans, with more than a million American expats calling it home… myself included. Properties trade in U.S. dollars or Mexican pesos… and the latter is where your increased buying power lies.
Mexico offers well-developed coastlines that include the Pacific, the Gulf Coast, and the Caribbean. The options for coastal living are limitless, despite the widely held misconception that foreigners can’t buy coastal property here.
Mexico also offers a wealth of well-preserved Spanish colonial cities. Climates vary from cool highland and mountain environments to the warm beaches on both sides of the country.
On the practical side, more people speak English in Mexico than in any non-English-speaking country I’ve been to.
Best of all, Mexico is close. You can fly inexpensively, or even drive there. If you’re traveling back and forth, its proximity can save you a lot of money and hassle.
Finally, they are a culturally familiar neighbor. Having lived in South America since 2001, I’d forgotten Mexico’s familiarity, which shows up in many small ways… such as their amazing food or familiar stores like Sam’s Club, AutoZone, Walmart, Home Depot, and Office Max.
Mexico’s downsides: In some locations, Mexico can be overwhelmed by Americans and Canadians… a presence that can obscure Mexico’s rich culture. To get away from the crowds, try the less-popular cities in the interior, like Durango. Also property on the coast must be held in a trust (controlled by you).
Mexico is my choice for the most hassle-free country in which to retire or own a second home abroad.
#4 Chile: A modern-world option that’s become more-affordable
Currency: Chilean Peso (CLP)
Exchange Rate: CLP 688 per USD
Currency exchange controls: No
Increase in buying power: 46%
Remarkably, Chile compares favorably with Brazil when it comes to miles of beautiful coastline. But when you jump into those icy-cold Pacific waters, you’ll see why Brazil has an advantage. Thanks to its long latitude, Chile offers a wide range of climates and seaside environments.
Another advantage is that Chile has four seasons that are opposite of those in the northern hemisphere, so with a second home there, you can enjoy your favorite season twice each year. It’s also diverse, with mountains, lakes, deserts, beaches, a wine region, and great cities… with plenty of skiing, fishing and wildlife.
Chile is a first-world choice, with an honest culture, low corruption, and low crime. It’s a place where you can enjoy drinkable water, excellent highways, and a strong economy.
And while formerly expensive, at today’s exchange rates, the properties and cost of living are a bargain for the lifestyle you get. (Properties in Chile trade in pesos, a monetary unit called UF, and sometimes in U.S. dollars. The “currency discount” in Chile only applies to peso-denominated properties.)
Chile’s downsides: The main disadvantage to Chile is the distance from the U.S. The flight takes over nine hours, although the airlines serve a good number of U.S. cities from Santiago. Also, Santiago has a pollution problem in the wintertime. I enjoy it most in their summer, especially January and February.
#5 United Kingdom: that cottage in the Cotswolds is now more affordable
Currency: Pound Sterling (GBP)
Exchange Rate: £0.80 per USD
Currency exchange controls: No
Increase in buying power: 37%
The UK is tops on this list when it comes to quality of life, with its citizens enjoying a life expectancy of almost 82 years (in America, it’s 78 years and declining). The infrastructure is first rate, and there’s competitive, frequent flight service to the Americas.
The UK Common Law legal system is familiar to Americans, you won’t need to learn a foreign language, and their cultural honesty is refreshing compared to many developing countries.
If you’ve previously found that cottage in the English countryside unaffordable, it may be time for a second look.
Today, dollar-holders have 37% more buying power than they had in 2013. Many potential property-buyers are waiting on the sidelines, in case the pound declines even further after a potential “hard” (no-deal) Brexit.
But if you’ve been wanting a property in the UK, I don’t recommend the sidelines for three reasons: there may indeed be a Brexit deal… Brexit may not happen at all… or the pound may already have a hard Brexit priced in. Bystanders may ultimately find themselves with a pound that’s more-expensive than it is today.
United Kingdom’s downsides: Unlike Brazil, Mexico and Colombia, people don’t go to the UK to enjoy the sunny, warm weather. It can be dreary… but green. Also, the UK is expensive by American standards and out-of-sight by Latin American standards. That said, it’s far more affordable that it was a few years ago.
The Runners-up in the currency discount survey
Of the markets I routinely monitor, there are a few others worth mentioning. They didn’t make the top five, but you still have strong buying power when compared to 2013.
- Canada is just behind the UK, with an increase in buying power of 32% for U.S. dollar-holders. With its low crime, stable government, and high standard of living, it’s a good choice for many.
- The eurozone comes in with an 18% increase in buying power since 2013. My top picks here are Portugal and Spain.
- New Zealand offers a 27% increase in buying power, along with a high standard of living, beautiful countryside, and of course English.
These areas enjoy some of the world’s richest cultures and highest standards of living, so they’re definitely worth a look.
Australia came in high on my currency list, with a 52% increase in buying power. I left it off because of their restrictions on property ownership by non-residents.
Choosing among the best currency-discounted markets
No one is disputing the fact that the dollar is strong right now. And no one believes that its upward climb will go on forever.
Each of the countries above gives the dollar-holder an advantage. And in reality, they’re all good options. It’s just a matter of seeing which one best fits your personal preferences and portfolio requirements.
The important thing is to take advantage of today’s strong dollar while it lasts.
(Lee Harrison is Latin America editor and Senior Property Correspondent for Live and Invest Overseas, a publishing house dedicated to living, retiring, investing, and buying property abroad. Lee has purchased various properties in Ecuador, Uruguay, Brazil, Colombia, Nicaragua, and Mexico. He currently lives in Mazatlán, Mexico.)