LittleGreyCat

On our latest trip to NZ (mid November '15 - mid January '16) the exchange rate started out pretty good then got worse. Around 2.35 sliding down to 2.2.

Before we set out in early September '15 and whilst we were in Australia it was even better - as high as 2.45.

However our pricing of properties and our subsequent estimation of income in NZD when we applied assumed a rate of around 2.2.

The current rate seems to have settled around 2.075. The lowest over 12 months was around 1.9. The lowest over 5 years was around 1.8.

There was a big surge around April 2015 and the rate is now falling back towards 2.

So the issue concerning me now is how low the exchange rate has to go before it is uneconomic to move capital to NZ? Or even move to NZ?

Could be the difference between selling a house in the UK and buying in NZ, and renting the house out until (hopefully) the exchange rate becomes a little more attractive.

My current feeling is that if the rate goes much below 2 then things start to get tricky.

Quick illustration (assuming you sell a house for £200,000):

Exchange rate 2.4:1 - $480,000
Exchange rate 1.9:1 - $380,000

This is a big difference, especially if you are trying to buy in Auckland.

Kotare

Wait for the Brexit vote in June and be ready to change. If Brexit fails the £ will bounce at least 5%, if not rent :-) The swings in the $ are impressive over a timeframe of a year or two.

MrsFychan

we got under 1.9 when we came over 4 yrs ago,tere is nothing you can do about it so you just have to work with it. Lower your expectations is really a thing over here (for us and a few others it is anyway).

Please please also don't get fixated on buying a house as soon as you get here. many many factors involved in buying a home and the fist 18mths are really really import to see if you have made the right decision in where you live. We jumped in 6mths after being here as the house in UK sold and we had the money, BIG mistake. We were still in the honeymoon period and it turned out the area was not what we thought it was, especially the schooling, and we lost money to move and had a year of absolute misery.

Clappy

Time - is something that you don't get again so it is not worth stressing over.

My first visit to New Zealand was in 2001. At that time One British Pound bought 3.4 New Zealand Dollars. Everything seemed so cheap!

At that time, you could go to a bar and buy a bottle of beer for four dollars. If you went to a fancy bar that bottle of beer would cost five dollars. Those were the days!

New Zealand used to be a place that you could get a bigger, more rural house, much more cheaply than was possible in the UK. That is still possible but probably not in a town where there a multitude of employment opportunities if you still have to work to pay for it.

Snap Shot

One pound was buying NZD 2.11 through a currency broker in 2011 when we came over.

For a few years one NZD was buying 50p, the banks' 'shop front' rate.

In 2013 it shot up to 58p for a dollar, that was nearly enough to make me want to put the house on the market !

Anyway, with the pound due for a wobble in June when the Brexit election is on, the NZD could appear to be even stronger to buy Sterling.

It's tempting to want to sell the house and make use of that. Then we would have to live in rented accommodation. What a palaver !

Bo-Jangles

You can waste a lot of life waiting for the exchange rate to align with stars and work in your favour - I read here the other day someone saying they were waiting for an improvement; well yes we've had some 'improvement' and a spike over the past year but rarely has it been as high as it is now at 2.07 and hasn't been much above 2.05 over the past five years.

I see people here are blaming Brexit for the 'decline' but there's more to it than that and I think you have to wonder what actually caused the increase in the first place.

Quite frankly I think you'd be silly to plan or expect higher than 2.05 unless you have insider knowledge or a gift of being able to predict the fortunes of the world. At least then you might get lucky and get a small windfall rather than being disappointed by your 'loss'.

Personally I am quite happy for it to stay where it is.

Clappy

This is the critical bit. My wife (who is a kiwi) tells me that she can remember that when she first went to London to do her OE in 1998 it took 4 New Zealand dollars to buy 1 Great British pound.

The exchange rate has changed since but if she hadn't gone at that time then we would never have met.

So, my point is really, live your life now - you won't get it again.

simonsi

This. If you want to come, do it. The exchange rate is only one factor of many, unfortunately it isn't a deciding factor or a guarantee of success...

jmh

One other thing to factor in is capital gain on your property and potential rental income. In came out in 2011 but London house prices had stalled and I didn't think I would get a good price for my house. Also, the exchange wasn't great. So I decided to rent it out and sell later. I also felt that I would feel free to move back if I found that I had made a mistake.

After 3 years prices in London had skyrocketed and I was able to get approx GBP 50K more, plus the rental income which paid of 2x my monthly mortgage payment. Having said this, I potentially lost that amount in capital gain by delaying my entry into the Auckland housing market because prices were skyrocketing here too.

British taxation has changed in this area, so you'd have to work out how much capital gains tax you might have to pay if you leave the house there - it wasn't an issue when I did it.

I agree with the point about not buying right away. Yes, I know renting is crap, but if it's only for a year or two, you can focus on your dream home somewhere down the line. And if you decide you want to go back, it won't be so costly.

2016 could be a rocky year, so prediction is hard. You have to look at what both the pound and NZD are doing, plus both property markets.

Justcol

Just cash it in a put an end to all the worry

Its free money anyway, you did nothing to earn it

desmondo84

very hard to call as mentioned about. I'm struggling to see why the NZD is so strong with Dairy through the floor. Brexit will be important and a NZ house price wobble could panic the market. Very hard to call the peaks and troughs though.

LittleGreyCat

NZ interest rate is still a lot higher than UK, and interest rates are one of the things that drive exchange rates.

AFAIK the pound strengthened last year (2015) because the market was expecting an interest rate rise towards the end of the year.

Now there is no set date for an interest rate rise and the pound is dropping back.

chc4me

One of the issues for the GBP currency at the moment is the upcoming vote to stay or leave the European Union. The current uncertainty is keeping the Pound low, and if the vote is to leave the EU, we could see it lower for a longer period of time (it will take years for the UK to 'disconnect' from the EU). However if the result of the vote is to remain part of the EU, then I would expect the currency will bounce back reasonably quickly to pre-christmas levels.

On the flip side of the coin, the NZD is quite strong across most other currencies mainly due to better interest rates and excellent returns from the NZ sharemarket. However there are plenty of commentators suggesting the NZ sharemarket is overpriced, NZ housing is overpriced, and low milk prices/high debt in NZ diary is a cause of concern. At some point we will see a correction and the NZD will weaken, when can not be predicted.

escapedtonz

Yip.
It's all about the EU referendum at the moment.
Since the prime minister notified the UK of the referendum to leave the EU it had an immediate effect on the exchange rate where the strength of the pound suffered considerably and the unrest is evident for all to see since, as the pound has seriously struggled against any of it's competitors since.
It doesn't really affect us now since all our cash is over in NZ, but we do still hold all our pension funds in GBP's at the moment even though they are invested in NZ.
We did consider turning these investments in to NZ$ late September last year when the rate was up at 2.45 $'s to the pound, but at the time we were holidaying in the UK and decided to wait until we returned. By the time we got home to NZ the rate had dropped to 2.28 so we held off and it just got worse so we live in hope that the UK doesn't leave the EU and the pound strength increases post referendum in July and we get back up to the 2.45's of last September where we can jump in and make the exchange and get a decent NZ$ value.

LittleGreyCat

Wondering now if we should have opened an NZ bank account last time we were over just to be able to transfer a bit of money at a good exchange rate (should we ever see one).

Never gave it a thought until the rate started dropping steeply.