Second-home owners have been cashing in on the strength of the euro against sterling by selling their places in the sun.

The pound has fallen 16% against the euro over the past year and hit an all-time low of €1.23 last week — compared with second-home owners have been cashing in on the strength of the euro against sterling by selling their places in the sun.

The pound has fallen 16% against the euro over the past year and hit an all-time low of €1.23 last week — compared with €1.47 this time last year. It also hit a two-and-a-half-year low against the dollar, falling to $1.77 — down 12.4% on the year and 16% from its peak of $2.11 in November.

Analysts expect sterling to weaken further, although mostly against the dollar rather than the euro, and traders show no sign of letting up on their bets against the UK currency and economy.

The Organisation for Economic Co-operation and Development said last week that Britain would be the only Group of 7 industrialised country to go into recession this year. That came after Alistair Darling, the chancellor, declared the economy was facing its most challenging period in 60 years.

“Our currency is collapsing, the central bank is not cutting interest rates and the government is not coming up with solutions,” said Gary Dugan at Merrill Lynch Global Wealth Management.

FC Exchange, a currency broker, said it has seen a 20% increase in clients selling their overseas properties over the past year. Nick Fullerton, managing director, said: “You are getting roughly £27,000 more for a €200,000 property than last year. With no improvement in sterling for the foreseeable future, investors may be better off bringing their funds back to the UK.”

So, is now a good time to sell? And what does a weak pound mean for invetsors? We offer some tips.

GET OUT WHILE THE GOING’S GOOD

An estimated 211,000 British households own a place in the sun, according to research group Mintel. Spain is the most popular, followed by France and America.

The European market has held up well relative to Britain and America — so far. House prices in France rose 3.2%, while those in Spain lifted 2.4% in the second quarter, but Europe is not expected to remain immune to the credit crunch.

Nick Barnes at estate agent Knight Frank said: “So far, price falls have been concentrated in the coastal resorts and among new developments in larger cities. Spain looks likely to fall into recession later this year, and house sales fell steeply during June . . . suggesting that wider price falls could be imminent.”

As if that weren’t enough, aviation experts are predicting an end to cheap air travel as the cost of fuel soars.

Over the past two months, World First has seen a 50% drop in inquiries from people looking to buy a holiday or second home abroad.

Bruce Borrie at Baydonhill, another foreign-exchange and overseas property specialist, said: “We’re seeing a clear trend of Britons selling up their homes on the Continent.” He expects owners of second homes in America to start selling, too, as the dollar continues to rise.

USE A CURRENCY BROKER IF YOU DECIDE TO STAY PUT

Those who meet mortgage costs by converting sterling to euros or dollars will have seen their costs rise. One way round this, says broker Savills Private Finance International, is to generate an income in local currency — by renting out the property part of the year — to meet repayments without being hit by exchange rate movements.

Or you can fix the cost through a broker to protect yourself. For example, a borrower with mortgage payments of €1,000 per month could set up forward contracts for a year’s worth of repayments at €1.23 to the pound. They would then know that each month the euro mortgage would cost £813.

Currency specialists allow you to lock into an exchange rate with a deposit of around 10% for delivery up to two years in the future — particularly useful if you plan to buy overseas and think sterling will continue to weaken.

If you think the picture is brighter, you could hedge — buy a forward contract for half what you need and leave yourself open to the spot market rate for the other half.

HUNT FOR BARGAINS

“For the property speculator the hot market is the US,” said Clem Chambers at the financial website advfn.com. “With the credit crunch biting lumps out of real-estate prices and the dollar still relatively weak against the pound, areas like Florida now offer some interesting opportunities.”

While prices across the US are down 17% over a year, they are still rising in some states, including Oklahoma, and there are signs of recovery in cities such as Denver, Boston and Dallas, Knight Frank said.

Three-bedroom villas in Florida are going for as little as £60,000, according to overseas property firm Assetz. It also expects Spain to emerge as a “bargain holiday home destination” in six months.

Property investment firm IP Global recommends buying into booming markets where the currency is pegged to the dollar — Abu Dhabi, Dubai and Hong Kong.

Although a weaker pound will mean buyers’ money will not stretch as far, it could give greater scope for negotiation, forex specialist HiFX said.

For example, a British vendor selling a €200,000 home would have expected to receive about £140,000 in October last year. That figure has now risen by almost £25,000 purely based on the weaker pound.

“Buyers should point out the seller can afford to drop the asking price to €171,500 and still receive £140,000,” said Mark Bodega at HiFX. “Or the buyer could split the difference with the vendor.”

CONSIDER A CURRENCY ACCOUNT

Those who live, work or draw a pension overseas could benefit from a currency account. Private bank Carter Allen, for example, allows customers to hold currency accounts in euros, dollars or sterling, with a minimum balance of just £5,000, €10,000 or $10,000. Account holders can switch between different currencies, but receive interest at a maximum of just 1.41% (on £250,000 or more).

BET ON CURRENCY MOVEMENTS

The easiest way to profit from exchange-rate movements is to sell sterling and buy strengthening currencies. Forex trading has opened this up to retail investors. Some 86% of all currency trades at Barclays Stockbrokers last Monday were on the pound against the dollar.

Spread-betting allows investors to “short” the market and speculate that a currency will continue to fall — or rise — against another currency. Gains are made from betting on the right direction.

Investors who “sold” sterling against the dollar when the rate was around $2 and closed the trade last week at $1.78 would have made a profit of £2,200 on a £1 per point contract, said spread-betting firm Capital Spreads.

INVEST IN AMERICA

The rally in the US dollar has driven returns from American funds to the top of the August performance tables: the North America and North American Smaller Companies fund sectors were the second and third top-performing sectors, with total returns of 9.03% and 8.97% respectively, adviser Hargreaves Lansdown said.

F&C US Smaller Companies gave the largest returns for sterling investors last month, rising 14.86%, while the Gartmore US Smaller Companies and UBS US 130/30 Equity funds rose 13.4% and 13.3%.

INVEST IN BRITISH BUSINESS

Weakness in the pound is, in some ways, good news for British business as it makes exports more competitive. Some 50%-70% of the profits of FTSE 100 companies are made in dollars — meaning these companies are growing faster in sterling terms.

Raj Basra at Deutsche Bank Private Wealth Management likes BP, Shell, HSBC, and Glaxo Smith Kline.1.47 this time last year. It also hit a two-and-a-half-year low against the dollar, falling to $1.77 — down 12.4% on the year and 16% from its peak of $2.11 in November.

Analysts expect sterling to weaken further, although mostly against the dollar rather than the euro, and traders show no sign of letting up on their bets against the UK currency and economy.

The Organisation for Economic Co-operation and Development said last week that Britain would be the only Group of 7 industrialised country to go into recession this year. That came after Alistair Darling, the chancellor, declared the economy was facing its most challenging period in 60 years.

“Our currency is collapsing, the central bank is not cutting interest rates and the government is not coming up with solutions,” said Gary Dugan at Merrill Lynch Global Wealth Management.

FC Exchange, a currency broker, said it has seen a 20% increase in clients selling their overseas properties over the past year. Nick Fullerton, managing director, said: “You are getting roughly £27,000 more for a ¤200,000 property than last year. With no improvement in sterling for the foreseeable future, investors may be better off bringing their funds back to the UK.”

So, is now a good time to sell? And what does a weak pound mean for invetsors? We offer some tips.

GET OUT WHILE THE GOING’S GOOD

An estimated 211,000 British households own a place in the sun, according to research group Mintel. Spain is the most popular, followed by France and America.

The European market has held up well relative to Britain and America — so far. House prices in France rose 3.2%, while those in Spain lifted 2.4% in the second quarter, but Europe is not expected to remain immune to the credit crunch.

Nick Barnes at estate agent Knight Frank said: “So far, price falls have been concentrated in the coastal resorts and among new developments in larger cities. Spain looks likely to fall into recession later this year, and house sales fell steeply during June . . . suggesting that wider price falls could be imminent.”

As if that weren’t enough, aviation experts are predicting an end to cheap air travel as the cost of fuel soars.

Over the past two months, World First has seen a 50% drop in inquiries from people looking to buy a holiday or second home abroad.

Bruce Borrie at Baydonhill, another foreign-exchange and overseas property specialist, said: “We’re seeing a clear trend of Britons selling up their homes on the Continent.” He expects owners of second homes in America to start selling, too, as the dollar continues to rise.

USE A CURRENCY BROKER IF YOU DECIDE TO STAY PUT

Those who meet mortgage costs by converting sterling to euros or dollars will have seen their costs rise. One way round this, says broker Savills Private Finance International, is to generate an income in local currency — by renting out the property part of the year — to meet repayments without being hit by exchange rate movements.

Or you can fix the cost through a broker to protect yourself. For example, a borrower with mortgage payments of ¤1,000 per month could set up forward contracts for a year’s worth of repayments at ¤1.23 to the pound. They would then know that each month the euro mortgage would cost £813.

Currency specialists allow you to lock into an exchange rate with a deposit of around 10% for delivery up to two years in the future — particularly useful if you plan to buy overseas and think sterling will continue to weaken.

If you think the picture is brighter, you could hedge — buy a forward contract for half what you need and leave yourself open to the spot market rate for the other half.

HUNT FOR BARGAINS

“For the property speculator the hot market is the US,” said Clem Chambers at the financial website advfn.com. “With the credit crunch biting lumps out of real-estate prices and the dollar still relatively weak against the pound, areas like Florida now offer some interesting opportunities.”

While prices across the US are down 17% over a year, they are still rising in some states, including Oklahoma, and there are signs of recovery in cities such as Denver, Boston and Dallas, Knight Frank said.

Three-bedroom villas in Florida are going for as little as £60,000, according to overseas property firm Assetz. It also expects Spain to emerge as a “bargain holiday home destination” in six months.

Property investment firm IP Global recommends buying into booming markets where the currency is pegged to the dollar — Abu Dhabi, Dubai and Hong Kong.

Although a weaker pound will mean buyers’ money will not stretch as far, it could give greater scope for negotiation, forex specialist HiFX said.

For example, a British vendor selling a €200,000 home would have expected to receive about £140,000 in October last year. That figure has now risen by almost £25,000 purely based on the weaker pound.

“Buyers should point out the seller can afford to drop the asking price to €171,500 and still receive £140,000,” said Mark Bodega at HiFX. “Or the buyer could split the difference with the vendor.”

CONSIDER A CURRENCY ACCOUNT

Those who live, work or draw a pension overseas could benefit from a currency account. Private bank Carter Allen, for example, allows customers to hold currency accounts in euros, dollars or sterling, with a minimum balance of just £5,000, €10,000 or $10,000. Account holders can switch between different currencies, but receive interest at a maximum of just 1.41% (on £250,000 or more).

BET ON CURRENCY MOVEMENTS

The easiest way to profit from exchange-rate movements is to sell sterling and buy strengthening currencies. Forex trading has opened this up to retail investors. Some 86% of all currency trades at Barclays Stockbrokers last Monday were on the pound against the dollar.

Spread-betting allows investors to “short” the market and speculate that a currency will continue to fall — or rise — against another currency. Gains are made from betting on the right direction.

Investors who “sold” sterling against the dollar when the rate was around $2 and closed the trade last week at $1.78 would have made a profit of £2,200 on a £1 per point contract, said spread-betting firm Capital Spreads.

INVEST IN AMERICA

The rally in the US dollar has driven returns from American funds to the top of the August performance tables: the North America and North American Smaller Companies fund sectors were the second and third top-performing sectors, with total returns of 9.03% and 8.97% respectively, adviser Hargreaves Lansdown said.

F&C US Smaller Companies gave the largest returns for sterling investors last month, rising 14.86%, while the Gartmore US Smaller Companies and UBS US 130/30 Equity funds rose 13.4% and 13.3%.

INVEST IN BRITISH BUSINESS

Weakness in the pound is, in some ways, good news for British business as it makes exports more competitive. Some 50%-70% of the profits of FTSE 100 companies are made in dollars — meaning these companies are growing faster in sterling terms.

Raj Basra at Deutsche Bank Private Wealth Management likes BP, Shell, HSBC, and Glaxo Smith Kline.