Buying Property Abroad - The Guide

If you are one of 'us' and have decided that you'd like to see more of the world, experience a different culture and broaden your geographical horizons, this guide to buying property abroad should prove a useful resource.

Globally we are all on the move!

In fact one in eight of us are considering purchasing a home in the sun in the next five years according to a recent UK survey.

Are you too dreaming of a new life abroad?

If you are one of ‘us’ and have decided that you’d like to see more of the world, experience a different culture and broaden your geographical horizons, this guide to buying property abroad should prove a useful resource.

You’ll find that the property buying process is slightly different as you move from country to country; in fact in some countries such as Canada and France the buying process can actually differ as you move from region to region.  As a result, specific buying advice broken down on a country by country basis is available elsewhere on this site - in this guide I’ll be covering the main tax, legal and financial points to consider when buying abroad and the general path of a ‘typical’ purchase process (not that there is such a thing!)

What’s fuelling our interest in the overseas property market?

If we take the UK as an example - there the housing market is seemingly ever on the up.  Those Britons who are acquiring massive levels of equity through their residential property are considering selling up, buying abroad and establishing a pension fund simply on the back of what they earn from their house sale.

Others in Britain can’t afford the first rung on the property ladder and are looking abroad to find an affordable home.

Then there’s the state and confusion surrounding the pensions market which is getting ever worse meaning that a growing number of Britons are considering the option of buying a second property abroad to let out for an income towards retirement.

Others just share a commonly held dream of owning a holiday home in the sun or escaping the rat race to get a new life overseas.

Whatever reasons you may have for considering buying property abroad, one thing is for certain; before you go ahead and buy you should understand some of the far reaching legal, financial and taxation implications of buying abroad.

Your hopes & dreams

Do you share the British national obsession for property prices, equity and re-mortgaging?  Did you know that this obsession is as foreign a concept in many other countries as mushy peas or vinegar on your chips! 

If you want to buy a second home abroad to make a quick profit, know that a home overseas will not necessarily rise in value, and please don’t assume that it will be easy to sell either!

It is essential to check out the property market in your country of choice with these points in mind so that you really do know what you’re getting in to!  Do your homework to see whether the market you are interested in can support and sustain your hopes and ambitions for it.

Sure, in countries such as Bulgaria and North Cyprus the real estate market has been suppressed for so long that property prices remain highly competitive and many can see the room for growth in the market.  In other countries such as Spain, France and Portugal where the property market has been soaring for many years can you expect the same levels of growth to go on indefinitely?

Every country is different.  If you decide to compare overseas property markets to the UK housing market some may not appear as buoyant as the British market, however consider examining the longer term trend.  Speak to established estate agencies in your country of choice to find out whether the market is stable or stale. 

If it is stable then you are more likely to enjoy a steady, realistic increase in your property’s value rather than the extreme peaks and troughs that the UK market tends towards.  If on the other hand the market is stale you need to consider the economy of the country and whether it is due a positive correction any time soon. 

The CIA has a world fact book which is a brilliant fact packed on-line resource.  I believe they cover all countries and they detail everything from GDP to economy overview, from climate to terrain.

Buy with an understanding of what you hope to achieve from property value growth, and buy with an understanding of whether the country you prefer can fulfil your expectations.

Of course, if you’re just looking to purchase a property for your own personal long term enjoyment, any potential market gains will simply be a bonus!

Budgets

When setting a budget for the purchase of your overseas property make sure you factor in the regular travel costs needed for visiting it!

This sounds so obvious but sadly many people are caught out and find that they cannot holiday in their new home as often as they like, or worse still - once they move abroad they find they can’t get ‘home’ for visits to the family etc.  Don’t get caught out!

And keep in mind any extra visits you might have to make occasionally to organise repairs and renovation for example.

Taxing issues

Now, if you intend to rent out your overseas property for parts of the year or even let it on a long term basis, you must declare this income to the tax man in your country of residence I’m afraid! 

Furthermore it may be necessary to declare it in the country in which the new house is located.  Make sure you seek solid tax advice before making any concrete buying decisions, and don’t rely on your estate agent to furnish you with the full facts. 

An aside - An estate agent is a salesman, not an accountant or legal adviser.  Many agents will happily tell you straight that they can’t help with the finer financial and legal points and some of the more helpful ones will give you the names and addresses of qualified people to assist you.  Others will try to convince you with their confidence and bravado that you don’t need to worry about ‘all that’.  Please don’t leave anything to chance...seek professional financial and legal advice when buying abroad.

Sorry, I went off at a bit of a tangent there but I felt it was pertinent to point this out!

Now then, if you’re going to rent out your overseas property you’ll probably need a good agent in the country you buy in to make sure your best interests are always looked after.  Make sure you know how much it’s going to cost you to have an agent manage both the day to day running of your property together with organising the rental side of things for you. 

Consider the local tax implications of buying, owning, renting and selling your property. Property and land tax in some countries can make UK stamp duty and council tax pale into insignificance so do be careful when you consider location! 

And don’t forget about capital gains taxation - in most countries some form of gain taxation will be levied against the sale of a second home for example.  Ask about these facts before you buy...that way you factor in any future costs against what you hope to achieve profit-wise.

Make a will to cover local inheritance tax laws, and know that the laws of inheritance differ greatly from country to country.  Specialist legal advice can always be sought, and when it comes to your overall estate planning you can successfully reduce or negate your estate’s future liability with careful financial planning.  If you’d like to find out more about this then please do .  We can supply you with information and ideas depending on your circumstances and country of residence and domicile.