Property abroad is becoming more popular every year as more discover its advantages. We look at where the homes are and what’s involved in an overseas purchase.
Buying a home abroad was until quite recently something only the very wealthy could do. The rest of us found that these properties were not only prohibitively expensive but also difficult to get to. These two factors are linked, of course. With the advent of low-cost air travel, the average Briton has found that holiday destinations are accessible more than once a year – and that has meant a big increase in the construction of homes in places such as Spain, France and Florida. This in turn has meant lower prices.
One factor that has brought about an increase in the popularity of buying property in general – and overseas property in particular – is the underperforming stock market. More people now see property as the safest place to put their money, and perennially popular holiday destinations are almost guaranteed a clientele that will pay for this investment.
Also, mortgage borrowing is cheap; far from the days when interest rates shot up to over ten per cent and hovered somewhere between there and 15 per cent, the past four years have been characterised by a low and surprisingly stable base rate. A further reason is the lack of supply in the UK property market; with relatively little housing stock in which to invest domestically, it is little wonder that those who have money to spend on property go further afield.
This trend towards increased ownership abroad has brought vastly increased choice to today’s buyers; there is now a situation in which prospective buyers choose from a number of locations and weigh up several aspects that will determine whether the purchase is a good idea. The decision about where (and whether) to buy should not be taken lightly; remember that although relocating abroad is a fantasy that many share, the actual transaction must be grounded in reality. Do your research, get your finances in order and be realistic.
Location
The overseas market is constantly growing, and locations which were hardly considered five years ago are now high on the list of British buyers. Spain is still the king of overseas destinations, with over 100,000 UK citizens now living there full-time and thousands more owning holiday homes or investment property. The country receives 12.5 million UK visitors per year, meaning those investing in property in a popular resort area would have no shortage of tenants. Properties tend to be apartments; those located next to golf courses are extremely popular, as are those near the seafront in the famous Costas.
France is also an extremely popular place for investment buyers, with half a million Britons now owning homes there. Cottages make up a good percentage of French properties and prices vary widely. Your budget will help you decide whether you want a villa in the Côte d’Azur or a simple cottage in less gilded (but still beautiful) Normandy.
Italy is gaining ground as a destination of choice, for both buyers and holidaymakers; homes in Tuscany are particularly sought-after. Portugal is a well-established holiday and retirement location for Brits, and buyers are also heading for Greece, Florida and, increasingly, eastern Europe.
Wherever you are interested in buying, don’t just go there once in mid-summer and make your decision. See what the area is like in all weathers, high season and low.
The process
Anyone considering buying a property in a foreign country, whether or not it is your intention to live there full-time, must take into account differences in the purchasing process and tax laws from that of the UK. It is up to you to make sure you let ignorance of the local laws, culture or language lead you up the wrong path; the purchase of property overseas is as important a purchase as a domestic one – and because of unfamiliarity there is more chance you can make a mistake if you are not careful.
In France, for instance, the sale of a second home is liable for capital gains tax. And the process of buying there is vastly different from what you may be used to; under French law, once you make a formal offer on a property you are committed to the purchase.
In Spain and Portugal, as in France, the contracts are signed much earlier in the buying process. Many newly built Spanish and Portuguese properties are bought off-plan, as is increasingly the case with newly built UK property; stamp duty on new builds is 0.5 per cent. The sale of a Spanish property is liable for 35 per cent capital gains tax for those who are non-resident in the country; there is also a complex system of allowances to partly offset the rate of tax, and these should be explained to you by a tax expert. There is also a large market in Spain and Portugal for plots of land on which the buyers then build their own homes. Wherever you buy – and whatever the type or state of the property – it is vital to have any contracts thoroughly checked by a bilingual lawyer.
Protect yourself
The most important thing when buying abroad is to make sure you have not made yourself financially vulnerable. Get the best advice you can at every stage of the process. There are many overseas property exhibitions that tour the UK regularly. Get an idea of the market in each country that interests you by going along to some of these and asking questions.
The importance of being prepared cannot be overestimated. Make use of the help that is available to you and your overseas purchase could be the best move you’ve ever made.