Currency is part of the holding

Cross-border property is often discussed as if the only variables were the street and the title. The unit of account is a third variable, present whether or not anyone hedges it. Rent, service charges, tax, and a future sale are denominated somewhere. If that somewhere is not the currency of the owner’s life, the holding includes a currency view.

The balance-of-payments framework records positions between residents and non-residents and, with them, the exchange arrangements under which those positions are settled. Regimes differ. Some currencies are allowed to move. Some are managed. Some are pegged until they are not. GRIP does not classify the regime of any market on this page. The IMF’s exchange-restrictions work is the place that work is done country by country, and it moves.

Three ledgers

Write them separately. First, the currency of the asset’s income and costs. Second, the currency of any borrowing. A loan in a different unit from the rent is a second bet, not a detail of the first. Third, the currency of the spending the asset is meant to support. A dirham rent that will be spent in dirhams is a different problem from a dirham rent that is meant to support a life priced in pounds.

Singapore, the UAE, Malaysia, and Georgia illustrate the spread without ranking it. A highly intermediated financial centre, a pegged hub currency, a regional currency with its own policy rate, and a smaller currency with a different reserve history are not four versions of the same risk. They are four reasons to read the monetary arrangements before calling the building ‘international’.

Hedging can move the risk to a stated date. It cannot make the economic exposure disappear after that date, and it is not free. This article does not suggest a hedge, a currency, or a ratio. It asks that the exposure be named in the same note as the title.