Article in Irish Times on investing in Poland and Hungary

Re: article in irish times on investing in poland and hungary.

Well I never-investing in a foreign currency carries exchange rate risk!

bearishbull-do you have some comment to make on this article?

Re: article in irish times on investing in poland and hungary.

i think many investing in eastern europe ignore currency risk and people should be aware of the increased currency risk from entry to EMU

Re: article in irish times on investing in poland and hungary.

Anybody investing in Poland would have made a 10% loss last year on FX, according to a Polish friend.

Re: article in irish times on investing in poland and hungary.

:d

Re: article in irish times on investing in poland and hungary.

EUR V's PLN
Time period: 03/18/04 to 03/24/06.

Average (737 days): 4.17874
High: 4.83320
Low: 3.73250

Emerging market currencies appreciated in real terms to developed economies source deutsche bank investment wing.

Lithuania currency appreciation 1700% since the fall of the berlin wall.

Look back to when Poland had a mini boom before its currency rate was as low as 3.29 V's the euro. There is a lot to run in that yet!

What he doesnt add in his article is that the rent is in Zloty's so this offsets some of the risks and with the huge percentage gains investors have had in Warsaw over last two years i dont think many are too worried.

Hes basing his assumption that recent movements of capital out of the markets in poland was due to the interest rate rise by the ECB.

What he doesnt state is that political uncertainty also depreciates a currency and at the moment they are talking about re-elections in Poland.

Maybe i should go work for the Economic and Social Research Institute

I believe to avoid this FX risk, it is possible to arrange a fixed rate for a certain period of time for a foreign mortgage?

I have invested in Poland, in Euro and leased out my (commercial) premises, also in Euro. This is quite common

I'm buying an apartment in Budapest due to complete in December 2007. As the purchase price is in HUF - surely any fall in the value of the Florint is good (for me) ?!

dicey_reilly said:

I'm buying an apartment in Budapest due to complete in December 2007. As the purchase price is in HUF - surely any fall in the value of the Florint is good (for me) ?!

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If the HUF falls in value, the exchange rate goes up. ie was 1 euro = 250 HUF, now 1 euro = 350 HUF. If you have paid 25m HUF for your apt (100k euro), your apt will still be 25m HUF but it will now convert to 71,428 euro if you sell.

The likelihood of the forint ever reaching a 1 euro = 350 HUF is extremely unlikely. It has remained pretty much close to the government's target of approximately 1 euro = 250 HUF for the past five years and in my opinion, is unlikely to change all that much. In fact, five years ago from today, it was almost exactly the same rate as it is now, albeit it with small fluctuation each way in the intervening period.

The Polish zloty is more volative against the Euro but it has fallen by 5% and not 10% over the last year and is now getting stronger again. However, if you go back as far as two years ago, figures suggest that it has fallen 15% during this time from a peak between 2003-2004. Over the last year it has reached a more stable rate of approximately 1 euro = 4 PLN.

Currency exchange rates are always a slight risk when it comes to overseas property investment, but it can go either way and I would have thought that most people would have been aware of this as a factor in their decision.

Budapest

budapest said:

The likelihood of the forint ever reaching a 1 euro = 350 HUF is extremely unlikely. It has remained pretty much close to the government's target of approximately 1 euro = 250 HUF for the past five years and in my opinion, is unlikely to change all that much. In fact, five years ago from today, it was almost exactly the same rate as it is now, albeit it with small fluctuation each way in the intervening period.

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You're probably right the bud, I just used whole numbers to make it simpler, instead of using 255 HUF.

redo said:

If the HUF falls in value, the exchange rate goes up. ie was 1 euro = 250 HUF, now 1 euro = 350 HUF. If you have paid 25m HUF for your apt (100k euro), your apt will still be 25m HUF but it will now convert to 71,428 euro if you sell.

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Sorry Redo - should have clarified - I've paid a deposit but do not pay the bulk (70%) until completion - hence fall in HUF means less to pay (and less in Euro if/when I subsequently sell

Cheers
Dicey