Watson International

The Value of the Dollar and How It Affects Real Estate

Often, the price of the dollar and the exchange rate against other currencies has a big impact on real estate in major markets like New York. A strong dollar means that relative prices have become more expensive than price in other countries, and a weaker dollar means that relative prices have dropped. A recent article in the Real Deal Magazine’s latest article speculates “Since election night, the dollar’s exchange rate against a basket of currencies has been on a tear. This has made designer jeans and jewelry in Manhattan’s retail boutiques more expensive for those earning their incomes in Euros, Yuan, or Yen. Could it also have an impact on New York’s real estate market?” (1).

Upon further investigation, it is obvious that there has been a recent shift in the value of the dollar, making it stronger against other currencies. Konrad Putzier of The Real Deal magazine writes that “the dollar is rising in large part because investors are betting that Trump’s planned fiscal stimulus will add inflationary pressure and boost the economy, making it more likely the Federal Reserve will raise interest rates. Higher interest rates in the U.S. should cause more money to flood into the country, which pushes the dollar up” (1). There is no doubt that an economic stimulation will greatly improve the state of the U.S. economy. Often when a fiscal stimulus is planned, it causes inflation. To prevent this inflation from weakening the value of the dollar, the Federal Reserve will likely raise interest rates so that the dollar remains strong relative to other currencies.

“If a rising dollar makes investing in New York more attractive for foreigners looking to benefit from currency appreciation, but also means they have less spending power in real terms, that should make assets at lower price points more attractive” (1). Real Estate for sale will once again become a hot commodity for investors all over the world and it is a great time to buy property before foreign investors and demand drive up prices.

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Image taken by Kylie Keller

Putzier writes, “even if Manhattan real estate is now more expensive, foreigners may still be inclined to invest if they believe the dollar will continue to strengthen.” Therefore, it is wise to invest in property now while the dollar continues to appreciate in value. That way, your investment will be worth more while the dollar stays strong. Time Magazine states that “The dollar surged to a more than 13-year peak on Wednesday, bolstered by upbeat U.S. economic data that showed the economy on track for steady growth and reinforced expectations of interest rate increases by the Federal Reserve next month and in 2017″ (2). Great economic change and growth is evident for the next season and well into the New Year as Trump takes his seat as the President of the United States. Lukman Otunuga, a research analyst at Forex Time Ltd says that “this could ensure dollar strength remains a key theme moving forward” (2).

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Written by Kylie Keller

(1) The Real Deal

(2) Time Magazine