Buying an off-plan property, purchasing a home or investment property before it is fully built, is a common strategy for investors and overseas buyers seeking value, new developments, or exposure to growing markets. Payments are typically staged over months or years: an initial deposit, followed by further installments linked to construction milestones, and a final balance on completion.

When the property is in a different country from the buyer’s home currency, exchange-rate movements become a significant risk. A favorable rate today can shift against the buyer by the time later payments are due, increasing the total cost in their home currency. A forward contract is one of the most straightforward tools available to manage this exposure.

The Currency Risk in Off-Plan Purchases

Suppose a UK buyer agrees to purchase an off-plan apartment in Portugal, Spain, or another eurozone market for €400,000. They may pay a 10–30% deposit immediately, with the remainder spread over the build period and due on completion 18–24 months later. Between the deposit and the final payment, the euro could strengthen against the pound. What looked like a manageable outlay can become substantially more expensive in sterling terms, even if the euro price of the property itself has not changed.

The reverse can also happen; the euro may weaken, and the buyer benefits, but most purchasers prefer certainty over speculation when large sums and fixed completion deadlines are involved.

What a Forward Contract Does

A currency forward contract is an agreement with a specialist foreign-exchange provider to exchange a set amount of one currency for another at a fixed rate on a future date (or within a defined window). The rate is agreed upon today, based on the current market rate plus or minus a small adjustment reflecting interest-rate differentials between the two currencies.

Once the contract is in place, the buyer knows exactly how much of their home currency will be needed to meet each future payment, regardless of how the spot market moves in the meantime. There is usually a small deposit or margin required to secure the contract, and the balance is paid on the maturity date when the currency is delivered.

How It Works in Practice for Property Buyers

In an off-plan scenario, a buyer can enter into one or more forward contracts that match the expected payment schedule. For example:

A forward for the next stage payment due in six months.

A longer-dated forward for the final balance due on completion in 18–24 months.

Some providers also offer flexible-date or window forwards, which allow the buyer to take delivery of the currency on any day within a chosen period. This is useful when exact completion dates can shift slightly due to construction delays.

Practical Examples

Example 1 – Protecting against a strengthening euro

A UK investor agrees to buy an off-plan villa in the Algarve for €500,000. The payment schedule is

20% deposit (€100,000) paid immediately at a rate of 1.18 (€1 = £0.8475), costing approximately £84,750.

30% stage payment (€150,000) due in 12 months.

50% final balance (€250,000) due in 24 months.

Without protection, the investor is exposed. Twelve months later the euro has strengthened to 1.10. The €150,000 stage payment now costs roughly £136,364 instead of the £127,119 it would have cost at the original rate, an extra £9,245. By completion the rate has moved further to 1.08, making the final €250,000 cost about £231,481 rather than the original £211,864, an additional £19,617. Over the life of the purchase the currency movement has added nearly £29,000 to the sterling cost.

If the investor had instead bought a 12-month forward for €150,000 and a 24-month forward for €250,000 at rates close to the original 1.18, the total remaining cost would have remained fixed near £339,000, eliminating the extra outlay.

Example 2 – Managing staged payments with greater certainty

A Canadian buyer is purchasing an off-plan apartment in Dubai for AED 2.5 million, with payments spread over three years. The Canadian dollar can be volatile against the dirham (which is pegged to the US dollar). By locking in forward rates for each future installment, the buyer can budget precisely in Canadian dollars and avoid the risk that a weaker CAD forces them to find additional funds or, in extreme cases, default on a payment.

Example 3 – Opportunity cost of not hedging

Even when the exchange rate moves in the buyer’s favor, the absence of a forward means the outcome remains uncertain until each payment is made. Many investors prefer to remove that uncertainty so they can focus on the property’s long-term performance rather than short-term currency swings.

Key Benefits for Off-Plan Buyers and Investors

Cost certainty – The sterling (or other home-currency) cost of future euro, dirham, or other foreign-currency payments is known in advance.

Budget discipline – Buyers can plan cash flow, arrange financing, and assess overall returns without exchange-rate surprises.

Risk transfer – Currency risk is transferred to the foreign-exchange provider for the duration of the contract.

Flexibility – Window or flexible forwards can accommodate minor changes in construction timelines.

Points to Consider

Forward contracts are binding. If the buyer later needs less currency (for example, because they renegotiate the purchase price or the deal falls through), there may be costs associated with closing or adjusting the contract. It is therefore important to match the contract amounts and dates as closely as possible to the expected payment schedule and to work with a regulated provider that understands property-related cash flows.

Forward contracts also involve a small cost relative to the spot rate, reflecting market conditions. For most buyers the value of certainty outweighs this modest premium, especially on larger or longer-dated purchases.

Conclusion

Off-plan property purchases already involve construction, legal, and market risks. Adding unhedged currency exposure on top can turn a carefully planned investment into an unnecessarily expensive one. A forward contract provides a practical, widely used way to lock in exchange rates for future payments, giving buyers and investors greater control over their total outlay in home-currency terms.

Feel free to contact Orbis Exchange to discuss your requirements.