A Strong Dollar

by Steve Van Derodar

Hedgeye | Photo via Steve Derodar

Many of us never thought the dollar would be this high compared to Philippine Peso and other currencies.

Is it good? For MoneyTalksNews, a currency’s strength is relative, measured against how much it buys relative to other currencies. Economists say the American dollar is strong when you can use it to buy more Chinese yuan, euros, or Mexican pesos than previously. The more pesos you get for exchanging a dollar, the “stronger” the dollar is.

Currently, the dollar is strong indeed. And as it is said, the price of the dollar and the exchange rate against other currencies always impact real estate; for those buying Philippine Properties, this is a signal for a good buy.

While, of course, ultimately, it leads to higher construction costs for ongoing or future development, it remains very advantageous for those who have already bought properties in preselling and, or are on their monthly payments. In general, developments usually go up on multiple factors and don’t necessarily increase prices for the immediate rise of a dollar. But overall, suitable for Philippine real estate investors as there’s more for their money when purchasing a property.

Supposing you bought a property at Php 7M, it just becomes $120K if at Php 58 dollar exchange rate compared to Php 45, Php 53 or so. There are also speculations that it could get higher past Php 60s in the coming days.

Alas, the days are here when we can celebrate our ability to repay mortgages faster. It means that more and more Filipinos, or even those who earn US dollars, see in capacity to buy properties in the Philippines.

Construction costs have been factored in for those unfamiliar with preselling properties, and the price has been determined; therefore, a locked-in price according to purchase is guaranteed. For upcoming projects, it likely causes price increases due to the increased construction costs but not immediately.

As I paid online with a humble preconstruction purchase that I recently committed to, I noticed the significant savings from the exchange rate. Perhaps, an excellent indication that having a high dollar exchange is quite beneficial.

It is common knowledge that significant condo owners in Philippine real estate buy from their US dollar income, translating to Philippine peso purchases. No wonder affordability is even more felt now that the dollar is more robust.

To illustrate how strong a US dollar is, one website states that:

  • EUR/USD: One euro buys $0.97 today, compared to $1.17 a year ago
  • USD/JPY: One dollar buys 144.18 yen now, versus 111.54 a year ago
  • USD/CHF: One dollar buys 0.98 Swiss francs today, compared to 0.93 a year ago
  • GBP/USD: One British pound buys $1.09 now, compared to $1.37 a year ago
  • USD/CAD: One dollar buys C$1.36 now, versus C$1.26 a year ago

When the dollar is high against the peso, we can pay amortizations and monthly payments at fewer dollars which could add to overall savings. The beauty of a real estate transaction on a presell is that you are locked into the listing price it was finalized the purchase and that whatever peso amount commitment doesn’t change upon contract agreement. Isn’t it suggestive of locked-in a price when you are on a better price advantage?

When the dollar is at its highest against the peso, some buyers are in a position to pay their real estate purchases in cash, given the opportunity. Why not? When it all guarantees the lowest price and even a commendable discount. Buying cash is a norm when the stakes and discounts are high.

While the cost of homes in the Philippines varies based on such factors as age, size, location, and several others that will generally affect price, committing to property investment are more attainable due to the strong dollar.

The increased demand for housing in the Philippines, with a population of over 100 million, houses, and condominiums in the urban areas has resulted in the steady growth of the need for rental properties and a healthy rental yield for investors. It is also the same reason why the sector is enjoying a boom.

With a strong dollar, perhaps, buying today is beyond question.

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.(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist in markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.)

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