In July 2022, when the euro fell below parity with the US dollar, it also marked the currency’s lowest level in 20 years. The last time the euro was at parity with the dollar was 20 years ago in November 2002. The currency, shared by 19 European countries, has slumped more than 11 per cent since the beginning of this year. However, this decline is not exactly representative of the euro’s value relative to the dollar and has more to do with the divergence in the monetary policies of the US Federal Reserve and the European Central Bank (ECB).
The current situation of an almost one-to-one exchange therefore holds great economic significance for businesses as well as individuals, especially for those earning and spending in US dollars, or in currencies pegged to the USD, such as the UAE dirham. A favourable exchange rate means travellers’ dollars or dirhams will go further when making purchases in the Euro zone.
Experts opine that this is a great opportunity for investors looking to get the most out of their dollars or dirhams to explore investment opportunities in Europe. Jeremy Savory, Founder and CEO, Savory & Partners, says, “If I can talk about the impact in the context of the citizenship by investment industry, it’s an excellent opportunity for those earning in dollar-pegged currencies. Right now, many investors see everything turning red in terms of stock, crypto, and real estate. They look at all the asset classes and see a frothy market and a lot of negative signals. Now is the time for people to invest in something that is already discounted, diversifies their currency, and with interest rates that don’t directly affect their investment.”
Real estate boom
While stressing that this is a golden opportunity for those who are in dollar-pegged currencies to make gains through investment, tourism, business expansion or franchise partnerships, Savory says this will do wonders for the real estate sector in markets like Portugal, which were already affordable. He points out that the Portuguese Golden Visa programme is one of the best ways for investors to get access to this market, and that euro-dollar parity will benefit both investors and the countries offering citizenship or residency by investment programmes.
“If you look at where Portugal was during the financial crisis, and how it’s booming today, you can say that the Golden Visa programme has worked in its favour. Others may dispute that, it’s not my role to say if it’s right or wrong, but the truth is, it stimulates economic activity by driving investment.”
June 2022 alone recorded the highest figures with over €78 million investments in the Portugal Golden Visa programme, a first since 2020, says Savory. He adds that when there is a recession coming, whichever country it impacts could look at such programmes as being a key driver of economic stimulus.
However, Savory is quick to point out that time is of essence here, Cyprus has closed down its citizenship programme and the Montenegro citizenship programme is expected to close by the end of 2022, Turkey has increased its investment threshold and Greece is expected to follow suit. “With Portugal, we’ve seen changes in the program in the past, so there’s reason to speculate and it really depends on what price they move it up to.
“I think we have some months before it comes into effect. Portugal only changed their legislation nine months ago, so I can’t see them changing it again so soon. Increased threshold does not mean higher fees. It means you just end up buying more real estate and there’s nothing wrong with buying more property.”
Webinar on Residency by Investment in Portugal
Savory & Partners is hosting a webinar in partnership with Gulf News on Sunday, October 9 between 11am-12pm titled Portugal: European Residency by Investment: Promising an Excellent Quality of Life