A property can keep its value in local currency while becoming worth less in euros. Conversely, a favourable currency movement can improve its euro value without any improvement in operations. Analysing an international property investment therefore means separating the asset from the currency used to measure it.
In Bali and Dubai, that work starts with contracts and actual cash flows. The currency selected for a commercial presentation does not, by itself, describe the exposure.
Identify the currency at each stage
A simple review records the currency of:
- The purchase price and acquisition costs.
- Building work, furniture and operating expenses.
- Revenue actually collected.
- Borrowing and debt repayments.
- The eventual payment to the investor.
Displaying figures in euros does not necessarily mean that revenue is received in euros. Similarly, a European investment vehicle may own an activity exposed to another currency.
The practical question is: which amount must be converted, when, by whom and on what terms?
Bali: understand the euro equivalent
For an exposure in Indonesian rupiah, the EUR/IDR rate affects the euro equivalent. When a rate is quoted as rupiah per euro, divide the rupiah amount by that rate.
Consider a fictional example, unrelated to today’s rate. IDR180 million equals €10,000 at IDR18,000 per euro. At IDR20,000 per euro, the same sum equals €9,000, before fees.
No local income has disappeared in this example. Its euro equivalent has changed. Useful reporting therefore retains the original amount and specifies the rate used, instead of displaying only a converted figure.
Dubai: a dollar peg is not a euro peg
The Central Bank of the UAE states that it maintains a fixed exchange rate between the dirham and the US dollar. That arrangement does not fix the dirham’s value against the euro.
For an investor whose spending and reference wealth are in euros, movements between the euro and the dollar therefore remain relevant. An asset priced in AED does not become a euro exposure merely because its price is converted in a brochure.
Our comparison of Bali and Dubai places this distinction within the broader characteristics of both markets.
Separate reference rates from execution rates
The ECB publishes reference rates for information and discourages using them for transactions. The amount actually received depends on the executable quotation, its validity period, commissions and any transfer charges.
Comparing the net amount arriving at the destination for an identical starting amount is often clearer than comparing isolated rates. It also matters whether charges are deducted from the amount sent or the amount received.
An indicative valuation conversion should not be presented as cash already collected.
Test different conditions without forecasting currencies
Our suggested approach applies three currency assumptions to the same budget: unchanged, adverse and favourable. Assumptions should be explicit and applied to the relevant cash flows at their expected dates.
This helps identify sensitive stages, including construction payments, debt service, asset disposal and the transfer of a substantial sum. It does not claim to predict a currency’s direction.
Any proposed hedge should be reviewed with a professional: covered amount, maturity, cost, commitments and possible mismatch with the underlying payment. The word “hedged” alone does not adequately describe the arrangement.
What reporting should disclose
A clear presentation should identify the original currency amount, its nature and date, the conversion rate, the charges and the net euro amount. It should also distinguish realised sums from estimates and amounts still receivable.
These distinctions complement the ownership and operating questions discussed in our guides to investing in Bali and investing in Dubai. They make figures comparable without attributing a currency effect to the quality of the property itself.