As the U.S. Dollar Surges, American Buyers Splurge on European Homes | Kanebridge News
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As the U.S. Dollar Surges, American Buyers Splurge on European Homes

Fri, Sep 2, 2022 9:53amGrey Clock 4 min
Favourable exchange rates and steady property prices have led to big interest in markets like London, Paris and Tuscany

Laetitia Laurent, a South Florida interior designer, has long had her heart set on a Parisian pied-à-terre. This summer, with the dollar soaring and Parisian real-estate prices holding steady, she took the leap. The 42-year-old, who lives in Boca Raton, paid 758,000 euros, or $US758,606, for a 460-square-foot, one-bedroom in the Golden Triangle—the prime residential and commercial area between the Seine and the Champs-Élysées, in the French capital’s pricey 8th arrondissement.

“I had been looking for a place for a long time,” says Ms. Laurent, who plans to use the apartment for work when she visits Paris to source designs for American clients, and for vacations with her husband and three young children. What helped propel her from just looking to outright buying was the strength of the U.S. dollar—“a huge factor” in the purchase, she says—15% over the past year, hovering at or near parity since mid-July.The dollar is rising so much, and so quickly, that Ms. Laurent estimates she saved around $80,000 between the time she first saw the apartment in early 2022 and when she closed in July.

Taking advantage of the most favourable exchange rates in a generation, and reeling from exploding prices at home, buyers are disregarding other sources of instability—including the threat of coronavirus flare-ups, rising interest rates, travel disruptions, and the war in Ukraine—to sink their dollars into European residential real estate, with savings on luxury properties, compared with last year, reaching into seven figures.

Kate Everett-Allen, head of international residential research at London’s Knight Frank, identifies six European markets where American interest is now the most notable: London, Paris, Provence, Tuscany, northern Italy’s Lake Como and Lisbon.

With the exception of Lisbon—where prices rose 11.5% between the first quarter of 2021 and the first quarter of 2022—price gains in local currencies are modest to nonexistent in these markets. According to the most recent Knight Frank Global Residential Index, prices in greater London and Paris rose less than 5% between the first quarter of 2021 and the first quarter of 2022, while prices in Florence, Tuscany’s capital, dropped 1.6% during the same period. By comparison, America dominates the Knight Frank study, with nine of the top 20 spots held by U.S. cities. The top three, Phoenix, Miami and San Diego, have seen prices rise 29% or more. Ms. Everett-Allen points out that, though increases in both London and Paris are modest by American standards, they are both seeing their strongest performance in several years.

Ulrich Leuchtmann, head of foreign exchange and commodities research at Germany’s Commerzbank, says that the current parity between the euro and the dollar is actually somewhat deceptive—making the euro seem stronger than it is. Using the more relevant metric of real purchasing power, he says, “The euro is weaker than it’s ever been.” He credits America’s status as a net energy exporter and the Federal Reserve’s monetary policies with helping to strengthen the U.S. currency, and he puts part of the blame for the euro’s weakness on instabilities generated by the war in Ukraine.

Dollar-based buyers can expect the bargains to last. He is forecasting a short-term continuation of current exchange rates, with the euro staying just below the dollar through the end of the year.

The dollar is also soaring against the British pound, allowing London, Europe’s most expensive capital, to become even more attractive to a range of American buyers, says Rory McMullen, head of Savills’ North America desk in the real-estate company’s private office, which specialises in multimillion-pound listings. With the pound hovering around $1.15, the current exchange rate is offering the best opportunity in London for the dollar-based buyer since 2008, he says.

Mr. McMullen says Americans are looking for trophy homes in central London neighbourhoods like Mayfair, Chelsea and Knightsbridge, and are generally less willing to look farther afield in more recently gentrified areas of the city that Londoners themselves might consider the height of luxury, such as Clerkenwell, near the traditional financial district, noted for its Victorian-era lofts.

Savings on high-end London properties can seem mammoth. A 3,229-square-foot, four-bedroom, Savills-listed apartment in Knightsbridge has an asking price of £13 million, or $15.13 million. When it came on the market in mid-January of this year, the price, which has been the same in pounds since listing, was $16.4 million.

Even Americans with more modest budgets are taking notice. Robin Adkins, a Nashville-area business owner, has “fallen in love with Capri,” the Italian island off the coast of Naples. She says she has been thinking about buying for some time, and the new exchange rate means she has increased her budget from around €450,000 up to €500,000, which now converts to $500,000—enough for a starter apartment in high-altitude Anacapri, the island’s exclusive western community, known for its historic villas and hairpin-curve roads. The dollar’s strength has “definitely affected my search,” she says.

Ms. Adkins’s agent, Capri-based Cristina Carrani of Engel & Völkers, says she is starting to see clients from the Pacific Northwest and the Midwest—a first, she adds, in her several years of selling homes on the island.

Elsewhere in Italy, American interest is way up in longtime favourite markets such as Lake Como and Tuscany, but is also finding its way to new areas, says Diletta Giorgolo Spinola, head of residential sales at Italy Sotheby’s International Realty. American second-home buyers are splurging everywhere from Puglia, in the heel of Italy’s boot, to the heart of Milan. She says sales of around $2 million are of greatest interest to her U.S. clients.

Once upon a time, American second-home buyers were eager to find romantic fixer-uppers in places like Tuscany and Umbria, but now, says Ms. Giorgolo Spinola, Italy-minded Americans are looking for turnkey properties “with few exceptions.”

In the Lisbon area, Americans have established a conspicuous presence among buyers in Cascais and Estoril, the plush resort-like suburbs west of the city. Rafael Ascenso, founder and CEO of Porta da Frente, a Lisbon-area Christie’s affiliate, says that Americans now make up a larger portion of his agency’s clientele than any nationality other than native Portuguese and expatriate Brazilians, who have long made up the majority of buyers in the area.

Mr. Ascenso says Americans now have bigger budgets than the Portuguese speakers, with average sales in the €1.7 million, or $1.7 million, range for the first half of the year. Another local real-estate agent, Teresa Almeida Pinto, a sales manager at Portugal Sotheby’s International Realty’s Cascais office, says American buyers tend to break down into two categories: young digital nomads looking for walkability in the densely built-up resort centres, and retirees who may want access to golf courses further out along the Atlantic coast. “We get more and more Americans every day,” she says.


Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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There was a time, not too long ago, when the most important must-have for would-be renovators was space. It was all about space to be together and space to be apart.

But as house prices increase across the country, the conversation has started to shift from size for the sake of it towards more flexible, well-designed spaces better suited to contemporary living.

For the owners of this 1920s weatherboard workers’ cottage in Fremantle, the emphasis was less on having an abundance of room and more about creating cohesive environments that could still maintain their own distinct moods. Key to achieving this was manipulating the floorplan in such a way that it could draw in light, giving the impression at least of a larger footprint. 

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Positioned on a site that fell three metres from street level, the humble four-room residence had been added to over the years. First order of business for local architect Philip Stejskal was to strip the house back to its original state.

“In this case, they were not quality additions,” Stejskal says. “Sometimes it is important to make sure later additions are not lean-tos.”

The decision to demolish was not taken lightly. 

“Sometimes they can be as historically significant as the original building and need to be considered — I wouldn’t want people to demolish our addition in 50 years’ time.”

Northern light hits the site diagonally, so the design solution was to open up the side of the house via a spacious courtyard to maximise opportunities to draw natural light in. However, this had a knock-on effect.

A central courtyard captures northern light. Image: Bo Wong

“We had to make space in the middle of the site to get light in,” Stejskal says. “That was one of the first moves, but that created another issue because we would be looking onto the back of the neighbouring building at less appealing things, like their aircon unit.”

To draw attention away from the undesirable view, Stejskal designed a modern-day ‘folly’.

“It’s a chimney and lookout and it was created to give us something nice to look at in the living space and in the kitchen,” Stejskal says. 

“With a growing family, the idea was to create a space where people could find a bit of solitude. It does have views to the wider locality but you can also see the port and you can connect to the street as well.”

A garden tap has also been installed to allow for a herb garden at the top of the steps.

“That’s the plan anyway,”  he says. 

A modern day ‘folly’ provides an unexpected breakout space with room for a rooftop herb garden. Image: Bo Wong

Conjuring up space has been at the core of this project, from the basement-style garaging to the use of the central courtyard to create a pavilion-like addition.

The original cottage now consists of two bedrooms, with a central hallway leading onto a spacious reception and living area. Here, the large kitchen and dining spaces wrap around the courtyard, offering easy access to outdoor spaces via large sliding doors.

Moments of solitude and privacy have been secreted throughout the floorplan, with clever placement of built-in window seats and the crow’s nest lookout on the roof, ideal for morning coffee and sunset drinks.

The house has three bedrooms, including a spacious master suite with walk-in robe and ensuite overlooking the back garden. Adjustable blades on the bedroom windows allow for the control of light, as well as privacy. Although the house was designed pre COVID, it offers the sensibility so many sought through that time — sanctuary, comfort and retreat.

Adjustable blades allow the owners to control light on the upper floor. Image: Bo Wong

“When the clients came to us, they wanted a house that was flexible enough to cater for the unknown and changes in the family into the future,” Stejskal says. “We gave the owners a series of spaces and a certain variety or moods, regardless of the occasion. We wanted it to be a space that would support that.”

Mood has also been manipulated through the choice of materials. Stejskal has used common materials such as timber and brick, but in unexpected ways to create spaces that are at once sumptuous but also in keeping with the origins of the existing building.

Externally, the brickwork has been finished in beaded pointing, a style of bricklaying that has a softening effect on the varied colours of bricks. For the flooring, crazy paving in the courtyard contrasts with the controlled lines of tiles laid in a stack bond pattern. Close attention has also been paid to the use of veneer on select joinery in the house, championing the beauty of Australian timbers with a lustrous finish. 

“The joinery is finished in spotted gum veneer that has been rotary cut,” says Stejskal. “It is peeled off the log like you peel an apple to give you this different grain.”

Rotary cut timber reveals the beauty of the natural grain in the kitchen joinery. Image: Bo Wong

Even the laundry has been carefully considered.

“The laundry is like a zen space with bare stone,” he says. “We wanted these different moods and the landscape of rooms. We wanted to create a rich tapestry in this house.”

The owners now each experience the house differently, highlighting separate aspects of the building as their favourite parts. It’s quite an achievement when the site is not enormous. Maybe it’s not size that matters so much after all.

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