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Real & pound exchange rate

Discussion in 'Brazil Property' started by nigelallen, Oct 5, 2007.

  1. beenthere

    beenthere Guest

    You are as bad at economics as you are at math golfxxxx. Do you know what risk factors are? Probably not as you don't do any research just spout ignorant bile.
    Read up on how offplans are priced then maybe you wont look so stupid all the time.
     
  2. Golfingworld

    Golfingworld New Member

    Just when I thought we were friends!
     
  3. Golfingworld

    Golfingworld New Member

    BT I know exactly how "off plan" developments are priced and the theory behind them...they are sold on one element only which is Capital Growth. To achieve that alleged growth the prices start at a low point or pre-release point which reflects a discounts. This brings buyers in as they think the next phase will be at a higher price. Nobody buys for capital growth if they thought prices might drop! Simple economics. So the developer releases phases each at a higher price,so every investor things he has made money as he assumes that the increased phase price reflects an increase. But, if anyone had ever sold a commodity (which is what this market really is) they would know that they are buying "forward options" really. So actually they are "spread betting" or taking part in a derivitives market as they are investing against a perceived market value and not a real market value for that commodity. Ask Nick Leesen about it, he is an expert! However, at some point that commodity has to be traded on the real market and not the perceived market and that is when the reality sets in, as the real market may not reflect the same price as the "concocted" option price. In otherwords, you need consumers for any product, be it a house or a bottle of pop and you can't just trade options around an internal circuit for ever. When reality arrives, you really fin out the real value..and clearly this has now occured at the Banana development. The fact is, if they could have resold at the same value as their second phase, they would have done, but they couldn't....why..because the "derivitive" price for the option was actually way above the real market value. That is why is is a crazy way to make money...you are better to bet on options or against how the Nikkei rises, same risk, more gain, less time.
     
  4. beenthere

    beenthere Guest

    I should have guessed that you would say it was a conspiracy :D.

    You are still wrong though, it has a lot to do with the need of a developer to get buyers quickly at the start of the project to get cheaper money to build from the banks as the level of risk to the banks goes down which means lower interest rates.

    The closer he gets to completing the project the more he can raise prices as it also becomes more attractive to the buyers because it can be used or rented out sooner. The buyer also gets this discount earlier on as their capital is effectively tied up longer on an asset that cannot produce income or be used until it is complete.

    Other than that I would have thought a crazier way to make money is to buy a villa 2km's from the beach in the middle of a city for £100k and expect to rent it out when a punter on holiday looking for a place to rent could go up the road an hour and stay on the beach in a brand new place that cost the same amount of money to purchase?


     
    Last edited: Oct 9, 2007
  5. Golfingworld

    Golfingworld New Member

    My friend, you don't seem to grasp the point that offplan prices are not based on bank interest rates but on the premise that people pay in advance as they think their "option" will make them profits....this is derivitve trading and not commodity trading. Commodities are traded daily on the market price, offplan "derivitives" are traded on a "perceived" end value. The developer should't have to borrow from the banks if his project is pre-financed by his purchasers, that is the who point of selling in stages as the buyers finance the deal,not the banks! In real civilised economies property buyers don't pay "upfront" for their properties and pay in stages, based on a perceived end value...they pay an agreed price and a deposit and the developer finances the development through his bank. The whole premise to "off plan" selling is that given time and over the period of the staged payments, by the time it is complete, you have made money..why becuase the value is artificially raised through each phase. The problems arise when the phases cant be sold at the raised price or the end resale value is less than some of the initial phases. Then it is like a pyramid, whick falls down..as buyers at the end of the spiral realise that it is cheaper to buy a 1st or 2nd phase resale than a 4th phase new one. What happens, the pyramid collapses!
     
  6. beenthere

    beenthere Guest

    I can see you have never been involved in any developments on the developers side.


     
    Last edited: Oct 10, 2007
  7. PAUL-brasil

    PAUL-brasil New Member

    The Real

    As 3 weeks ago when Nigel showed that the R$ hit 3.69 to the £ now its hit lower at today being £1 - R$3.59. Again the strongest its ever been! The £ now stablised again with other major stable curencies after the credit crunch, but with the $USD still falling.
    For me (if i was not considering my 2nd investment in Brazil) and others who have already fully paid for a property already this could be seen as good as for example the average rate i have paid including everything all my expenses etc has been R$4.1 to the £1 so if i sold today would give me a 12% increase purely just on that fact as Golf rightly says I would always look at my investments in ££££s as that is where my investment came from. BUT (1)for people who have only paid a small depoit and are paying over whatever period then this is not good news as you would have planned your cost in £s would now be potentially 10%-20% more until the development is complete. (2) Again like Golf says the R$ being stronger is not so good as the market is less attractive to foriegn buyers so again why it is very important to aim strongely at internal market too in your investments. (3) A stronger R$ against other curencies is also not good for its enconmy as Brazil exports more than it imports so same as no 2 its less attractive to foriegn purchases.
    Any thoughts???
     
  8. nigelallen

    nigelallen New Member

    Excellent post Paul,

    in simple terms a $R250,000 3 bed apartment in August would have cost £61,195, and today it would cost you £69,444, their is an oversupply of apartments as it is and this will just make matters worse, something is going to have to give somewhere along the line, perhaps when developers start to see their developments not selling they will cut their cost a bit, and hopefully we will see the end of the greedy 10% commission agents,
     
  9. RalphJ

    RalphJ New Member


    You probably did Paul...unfortunately.
     
  10. michaelbush

    michaelbush New Member

    If you look at the Brasilian economy statistics and the potential growth the country has, coupled with the stability of low inflation, massive balance of payments surpluses, repayments of IMF debts, you might, like e feel that the brasilan real is not going to weaken dramatically unless there were a miracle turnround in the fortunes of the USA and the dollar strengthens. The pound is also weak at present. I understand that some 12 years ago the real stood at parity to the dollar. It has strengthened in just a short time from 1$ = R$2.12 to 1$ =1.74R$. Perhaps it will return to parity!! It is an investment decision each has to make, wherever you invest abroad in another currency. There are risks. If you buy now and the pound strngthens against the real again then you will of course pay less for the stage paymens. In any even property prices on a like for like basis are among the lowest in the world, and look to be a great long term investment.
     
  11. Janoulaki

    Janoulaki New Member

    Hi guys,

    To avoid losing on the property price when purchasing use the exchange company to fix the rate. Once you know that you have to pay 100,000, fix it the very same day in the best rate available to avoid losing on the fluctuations on the currency market.

    More info give me a shout

    Cheers

    J
     
  12. nigelallen

    nigelallen New Member

    Hi guys,

    To avoid losing on the property price when purchasing use the exchange company to fix the rate. Once you know that you have to pay 100,000, fix it the very same day in the best rate available to avoid losing on the fluctuations on the currency market.

    More info give me a shout

    Cheers

    J

    Hi J

    What company can you fix the rate with , ?
     
  13. michaelbush

    michaelbush New Member

    The problem is that you cannot buy reais. THe exchange rate is fixed by the central bank of Brasil when the money enters the country. Since you cannot have a bank account without residency it is difficult! The purchase money should be paid direct to the sellers bank account, not to any third party. If you have any info for buying reais in advance and fixing a rate I would appreciate the info, but my contacts tell me it is not possible.
     
  14. mitico67

    mitico67 New Member

    Hi Janoulaki, I've registered my details with a couple of indipendent exchange companies and both of them say that they cannot exchange GBP into Breais. How can I fix an exchange rate GBP/Breais that I feel comfortable with if they don't do it and the vendor in Brazil needs to be paid in local currency? Any help much appreciated
     
  15. Janoulaki

    Janoulaki New Member

    Guys!

    let me talk to the currency broker
    will get back to you
    ;)
     
  16. JMBroad

    JMBroad New Member

    Brazilian Reais are a non trading currency therefore the rate can not be fixed?
     
  17. daniel_JRA

    daniel_JRA New Member

    Growth

    Hello folks,

    I am just posting this article from O POVO newspaper - 11/05/2007 just to give you an insight of the dollar market in Brazil..


    Growth
    Low dollar threatens the exports, alerts CNI

    The long period of cheap dollar threatens in a more concrete way the
    exporting performance of Brazil.

    The long period of cheap dollar threatens in a more concrete way the
    exporting performance of Brazil, according to study of the National
    Confederation of the Industry (CNI). An inquiry done with 1.502
    enterprises showed that the majority wants to grow in 2008 and
    attributes this possibility of growth for sales in the Brazilian
    home market. The pessimism is big as for the exports, principally
    between small and middle size companies, which face bigger
    difficulty to adapt to scenery of increase in value of the Brazilian
    currency.

    The dollar in the range of R$ 1,70 preoccupies the businessmen and
    increases the worries of the government for the performance of the
    exports and import trade market, mentioned a integrant of the
    economical team of the Federal government to a Estado de Sao Paulo
    newspaper reporter. The subject is in study by Treasury Department,
    but up to the moment there is no consensus on which to do. The
    diagnosis on the dollar's fall takes significant aspect for foreign
    investment on this country.

    In spite of the increase in value of Real, Brazilian currency,
    reports of the international trading, announced last week, indicates
    a good performance of the Brazilian international commerce. However,
    the imports have been growing much more than the exports in the last
    months. For the time being, the favorable prices for products as the
    commodities have supporting the increase of the exports.

    This situation, however, is not a reality for the whole exporting
    sector.


    Daniel Cysneiros
    Consultor Imobíliario - Creci 6070
    (+5585) 88739465 / 30943493
    Skype- dcysneiros
     
  18. michaelbush

    michaelbush New Member

    Maybe reducing interest rates here will have an effect on the exchange rate? Isn`t this the reason Britain stayed out of the Euro, so exchange rates could be manipulated by the Govt, through the Bof E. The higher the rate the stronger the currency I think.
     
  19. beenthere

    beenthere Guest

    I too am not sure how people come up with this. The R$ is not set at parity to any currency.

    The currency is freely traded and is floating, i.e. supply and demand for the currency dictates the price.

    This also means that I can fix the rate in the future by buying a forward contract. The only problem with this at the moment is that you are talking in the millions not 100k's. This is usually where a currency service provider steps in and offers this type of service to the average punter.
     
  20. michaelbush

    michaelbush New Member

    In theory BT`s view sounds right. The only problem I understand, is that, in reality, you cannot buy reais. When making payments for property as an individual you have to send the money in sterling or euros, it converts to dollars and then to reais. this is done when the money arrives not before it leaves. The rate may be fixed only when the money arrives in the receiving banks` hands, and only when the recipient signs his contract to liquidate the foreign currency into reais. Commercially the rules may be different, I do not know.
     
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