With the UK property market facing sustained pressure from higher interest rates, rising costs and shifting tax rules, it’s no surprise that a growing number of landlords are looking beyond Britain’s borders. Overseas property investment can offer genuine portfolio diversification, access to markets with stronger rental yields and the possibility of long-term capital growth in regions where demand is outpacing supply.
But investing internationally as a landlord is materially different from simply buying a holiday home. You are entering a world where currency movements can profoundly affect both your rental income and your overall return.
The burdens on landlords on the UK seem to get greater every day. But while the administrative and financial burden on UK landlords worsen, some of the most popular international markets are offering net rental yields of 5% to 8% or more.
There is also the diversification argument. A portfolio that spans multiple currencies and economies is less vulnerable to a single domestic policy change or economic shock. And in some markets — Portugal’s Algarve, Spain’s Costa del Sol, parts of Greece and Cyprus — sustained international demand from buyers and renters alike has underpinned property values even during periods of broader economic uncertainty.
Spain remains the most popular destination for British overseas property buyers. Areas like the Costa Blanca and Costa del Sol offer a mature market and a well-established legal infrastructure for foreign ownership. Portugal has also attracted attention in recent years, while Italian cities are always a popular choice. In France, investments in gites are popular, but this tends to be more of an extra income stream for retirees there. Serous investors in France tend to focus on cities and ski properties (see our case study).
In all of these European countries the rules have tightened up in the face of local opposition to Airbnb et al. Even so, strong rental demand from both tourists and long-term tenants mean there are great opportunities.
Further afield, aside from its current problems, Dubai has emerged as a significant destination for UK investors, offering no income tax on rental earnings, high yields in certain areas and a buoyant short-let market. Florida remains a safe place to do business (and the unpopularity of the current president maybe offers opportunities to buy when the Florida market is weak?).
The USA is an object lesson in currency risk for overseas investors as the US dollar (and those currencies pegged to it such as the Emirati dirham) moves in reaction to the actions of President Trump.
This is where overseas property investment becomes distinctly different for a landlord. A landlord’s financial relationship with a foreign property is ongoing: you will be receiving rent in a foreign currency, paying local costs and maintenance bills in that currency, and periodically repatriating profits to the UK. Each of those transactions is subject to exchange rate movements which can move significantly over time.
Consider a landlord with a property in Spain, receiving rent in euros. If the GBP/EUR rate moves by 5% over the course of a summer – a shift that’s well within normal market ranges – the rent on that rental’s summer season can easily be a thousand or more pounds short. Of course it can go the other way too, but you will never know until it happens, and few serious investors want to take that kind of gamble.
It is worth mapping exactly where currency exposure arises, because it is more pervasive than many landlords initially expect:
The purchase: The initial purchase price is agreed in a foreign currency. Between exchange of contracts and completion – which in many countries can be a period of weeks or months – the exchange rate can move against you, significantly increasing the sterling cost of the purchase. This is one area where a forward contract (locking in an exchange rate in advance) is widely used by overseas property buyers.
Ongoing rental income: If you rent out your overseas property, you will receive income in the local currency. Whether you spend it locally on costs or convert it to sterling, you are exposed to rate fluctuations. Many landlords find it useful to set up a regular payment plan with a currency specialist.
Property costs and maintenance: Management fees, maintenance, insurance, local taxes, and utility bills will all typically be denominated in the local currency. If you are funding these from a UK bank account, each payment involves a currency conversion. Using a specialist currency provider rather than your high-street bank for these regular payments can reduce the cost significantly.
The eventual sale: When you come to sell, the proceeds will be in the local currency and will need to be repatriated. A large, one-off transfer of this kind carries significant currency risk and is one of the most important moments to take professional advice on timing and hedging strategy.
Practical currency tools for landlords
Unlike holiday buyers making a one-off purchase, landlords have recurring currency needs. Smart Currency Exchange offers a range of tools that are specifically suited to this pattern of use:
Forward contracts: These allow you to fix a specific exchange rate now for a transfer that will happen at an agreed future date up to 12 months ahead. This is particularly useful when you know you will be repatriating rental income at a specific time, or when you want certainty on the sterling cost of a property purchase.
Regular payment plans: For landlords who want to convert monthly or quarterly rental income to sterling, a regular payment plan automates the process and can be used with a forward contract..
Market orders: If you have a target exchange rate in mind for a larger transfer, you can instruct a currency specialist to execute the transfer automatically when the market reaches that rate. This removes the need to monitor rates constantly.
Spot contracts: For transfers you want to make immediately, a spot contract lets you take advantage of the current rate. Specialist providers typically offer significantly better rates than high-street banks, and for a landlord making multiple transfers a year, this saving accumulates meaningfully over time.
Overseas property investment offers genuine opportunities for UK landlords looking to diversify, access higher yields, or reduce their concentration of risk in the domestic market. But it introduces a layer of complexity, particularly around currency risk.
Unlike a one-off buyer, a landlord has an ongoing, multi-year currency exposure: on rental income, on running costs, and eventually on sale proceeds. Managing that exposure with appropriate tools such as forward contracts is as important a part of overseas landlord strategy as selecting the right property.
Smart Currency Exchange specialises in helping property investors and landlords manage their international currency needs. To speak to a specialist about your situation, call 020 7898 0541 or visit smartcurrencyexchange.com.
A client is buying a €710,000 new-build property in the French Alps, with a deposit in April and then stage payments up to completion in the summer. He was worried that each stage payments in euros would vary in pounds in response to pound-to-euro exchange rate movements.
He paid his initial deposit with a spot contract at that day’s exchange rate, but booked all the later stage payments as forward contracts.
All currency risk is now removed from the equation. As an investor, he knows exactly what his outlay will be and can budget accordingly.
