Buying property abroad for expats is a lot different from taking on a home in the UK.
In many places, the property market follows different rules and some countries even ban foreigners from buying land or a home.
Expat property buyers need to stay alert to watch for scams and rogue developers who try to exploit the rules to the buyer’s cost.
TV and the newspapers are full of property horror stories about unscrupulous scammers ripping off expat home buyers.
But it’s not that hard to safely find and buy the property of your dreams if you follow some practical advice that holds good wherever you intend to settle.
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The Nine Golden Rules Of Buying A Home Abroad
Property experts have squeezed a lifetime’s experience of buying a home abroad into nine easy to follow rules for expats.
An independent lawyer who has no business or personal links to the seller or their agents should carry out most of the checks.
This goes a long way to protecting your interests should the deal go wrong.
The local British Embassy, high commission or consulate generally has an online list of reliable lawyers who speak English. A listing does not guarantee their work but should weed out the cowboys.
It’s also a good idea to take extra care when buying off-plan as the home has no worth until building is complete and fly-by-night developers have often gone missing with deposit cash before finishing construction.
- Find out the local laws on buying or renting a home for expats before starting your search for an ideal home
- Get any agreements clearly explained in writing – and with a certified English translation. Both buyers and the other party should sign the document and take a copy each. Keep copies of any invoices and payments you make
- Check the seller or developer owns the home and is legally entitled to transfer ownership
- Check the deeds are clear of any loans or other debts
- Find out if the bills are up to date, like utilities and local taxes, and that you do not take on any liability if you buy
- Make sure drains, water, electricity, and gas supplies to the property work properly as it will cost a lot more to pay for connection.
- Speak to other expats and the neighbours to see if they have any issues about their homes that could affect your property
- It’s worth taking some time to look at other homes built by the developer and to chat to someone who lives there about their buying experience
- Think about drafting a will in the country where your new home is. Inheritance laws are likely to differ from those in the UK and you need to make clear who you want the home to go to when you die
The Foreign Office also has an online list of English speaking translators and interpreters abroad who can look at contracts and other legal documents for you.
Why Do You Want A Property Abroad?
Think about why you want a home in another country and how you will use the property.
It’s easy to fall in love with a place on holiday but spending a few weeks there as a tourist is different from living somewhere full time.
Where and why you want a property are vital questions that set your search area and often your budget.
The most popular options are:
- To retire to a place in the sun
- To live in as a family home while on assignment for work
- To spend time as a holiday home
- To generate income as an investment from rent and a profit from a gain in price
Buying as a part-time home and as an investment often do not go well together because holidaymakers look at property in a different way from a long-term resident.
If you’re thinking about buying property as a holiday home, consider long-distance management like who cuts the grass, cleans, and does the laundry.
If you are seeking an investment, look at rent, yield and if home prices are appreciating as well as holiday homes in the neighbourhood.
Looking For Your Home Abroad
The search for that place in the sun is not much different abroad than in the UK.
Just like searching online portals and visiting estate agents in the UK, the process of buying a home abroad is similar in most countries.
Long-distance house hunting is easy online and most familiar British property portals have overseas sections.
Other traditional sources of property advertising are also online and face-to-face, including developers, estate agents and property shows.
If you plan to buy through a local estate agent, consider checking their credentials through a trade body, like the Association of International Property Professionals (AIPP). In the UK, estate agents and letting agents are regulated, but this is not always the case overseas.
Estate agents are good for gleaning local information about the property market, rental prospects, and places where prices are rising – and falling.
Property shows are a good place to mainly meet developers and to gather information.
Don’t forget that developers, estate agents and everyone at a property show all want to sell, so take their remarks at face value and make your own inquiries before going ahead with a purchase, which is why you need that independent lawyer to ensure fair play.
Consider buying direct from a developer as such a sale would not generate commission for an agent, which could mean the way is clear to negotiate a discount.
Research, research, and research again
Find out as much as you can about the place you intend to live before you go by scouring the internet for information.
Ask expats who have already moved to your target destination about their lifestyle and experience through online forums. Social media is teeming with expat resources if you look in the right places, while English language newspapers offer an expat perspective on local goings-on.
Discover important residency, tax, and pick up facts about day-to-day living from expat web sites and a wealth of information in the Foreign & Commonwealth Office’s Living in guides. Learn the difference between residency and Domicile.
The UK National Health Service explains how to access healthcare in dozens of countries.
Try before you buy
Don’t forget buying a home is different from investing in a property to rent out. You have personal reasons for buying that may conflict with those of running a holiday business.
That means you might not wish to live with the noise and activity of a tourist area that makes a property great as a holiday let.
Try before you buy by spending some time living like a local instead of a holidaymaker to get a feel for a neighbourhood and if it is right for you.
Take independent advice
Not taking independent legal advice can lead to problems with property titles as developers and estate agents will recommend a lawyer who they know and trust. This can lead to a conflict of interest which can result in the buyer losing money.
Look for specialist financial advice for expats to make sure the advice you get is specific for your needs.
Never tie up with the lawyer suggested by someone who acts for the seller or stands to make money from your property purchase.
Some other tips about professional advice include:
- Hire your own translator, surveyor and any other professional you may need to call on
- Never sign a document in a foreign language until you have seen an independent translation
If the seller suggests this is a deal-breaker, then walk away because something fishy may be going on that they do not want you to find out about.
Beware of CGT when selling your UK home. For expats, the rules to watch out for apply to ‘non-resident CGT’, often referred to as NRCGT.
Do you have the right to buy?
Outside the EU, many countries have laws that limit the ownership of property for expats.
Residence visas can come with restrictions on the value of a property, while expats may need a licence to rent out a second home or holiday let.
Always check you have a legitimate right to buy with an independent lawyer before agreeing a contract with a seller.
Don’t overlook many countries are federal states, which can mean different local laws apply to property ownership in each state or province.
Putting down a deposit
Paying a deposit is the first big step in buying a home abroad.
This generally means handing at least 5% or 10% of the property price to a third party and trusting them not to disappear with the cash.
Try to pay by bank transfer or on a card so there is an electronic trail for the money.
In most cases, this is not a problem, but a few crooks fall to the temptation of cash. Your independent lawyer should check out the credentials of the seller before you part with any money.
Experts say if you have a problem, it’s more than likely your lawyer is not independent and was recommended by an estate agent or seller and acts for both sides of the deal.
Hidden costs of buying property abroad
Just like buying a home in the UK, the cost does not stop with the sale price.
You may have to fork out for a range of fees during and after the purchase, like:
- Paying for a surveyor to give the property a clean bill of health
- Mortgage fees – these could cover arrangement fees, any charges from a financial adviser and administration costs charged by the lender
- Foreign currency transfer when you move the money. A specialist money transfer firm tends to be cheaper than a bank or building society
- Cost of setting up a power of attorney for your lawyer
- Shipping and insurance costs for moving your furniture and belongings
- Fees for drafting a will, which is required by law in some countries
- Paying out for utility, cable TV or internet connections
- Ongoing costs may include local municipal property taxes, charge for collecting rubbish and community fees – or service charges – for the upkeep of a complex or estate
These fees can increase your property purchase price by up to 25%, so make sure you budget for them.
Non-Resident Landlord Scheme
If you are moving abroad to live and leave a UK home behind that is now rented by tenants, you need to join the Non-Resident Landlord Scheme.
The scheme is run by HM Revenue & Customs to make sure foreign landlords pay tax on their rental income in the UK.
NRLS is not just for expats who have moved abroad for good – the rules apply to anyone whose lives outside the UK for six months or more.
If you do not sign up for the scheme, a letting agent tenant or anyone else looking after a rental home for you must deduct tax from your rents before paying them to you.
The rules apply to residential and commercial property, including flats over shops.
NRLS is compulsory, not a tax choice for expats.
Finance For Buying A Home Abroad
Buying that perfect home in a place in the sun is a dream for many expats – but raising the money to do the deal is often a real problem.
Moving abroad may increase your salary while the cost of living is often cheaper but finding a mortgage to buy a home is a lot harder.
UK lenders are unlikely to agree to secure a loan against a foreign property, while you will have no credit history to present a lender in your new country of residence.
Although a bank where you now live may consider an expat loan, many Brits abroad must try to access a mortgage through a financial adviser or offshore lender.
Many specialist lenders will offer loans, but only to expats with a spotless credit history, proof of earnings and who can afford to stretch to a hefty deposit and an interest rate normally higher than in the high street.
Add to that of banks simply refuse to lend in many countries and finding the right expat mortgage becomes a time-consuming and frustrating task.
Mortgage affordability restrictions introduced across the European Union will rule many expats out of consideration by lenders as well.
Few countries have a mortgage product for buy to let or holiday let properties that works on the same basis as British investment loans and treat them as commercial borrowing.
Expats generally have two borrowing routes –
- Raising extra cash against their home in the UK
Rising prices mean more headroom is available to borrow against property in Britain. With low mortgage rates and a wide range of fixed and discount mortgages, this may also offer the cheapest option as well
- Borrowing against an overseas property
This is a risky option for some expats as British lenders will not lend on foreign property as securing the loan and currency rate fluctuation risks complicate the deal, so going to a local lender is often the only choice
Many expats fall in love with a property before arranging the finance, but to avoid disappointment, it’s often better to approach a lender first for an in-principle offer.
Safeguard Your Money When Buying Off-Plan
Buying a home under construction or yet to be started adds to the risk wherever you purchase.
Besides all the emotional stresses of buying a home, mix in extra concerns about the financial stability of the developer and what happens to any deposit if they go bust or do not complete the property.
Protect yourself by taking some sensible precautions:
- Discuss the best way to pay a developer with your lawyer before parting with any cash
- Ask for a bank guarantee for full return of any money paid and that the money is protected in a special account separate from the developers running costs – and make sure the guarantee is in plain English so the terms are not ambiguous
- Contracts should guarantee repayment of any deposit plus interest buyer if building does not start or the property is not in a state to live in within an agreed timetable
- Record all payments with receipts and invoices
- Keep a build-diary which details meetings, agreements, invoices. Take plenty of photos of how the build is progressing. These are all evidence for a court if you should sue the developer and a keepsake when you get the keys
Developers will try to avoid these conditions, but they standard terms in the trade.
Tax Effective Ownership
If you plan to let the property as a holiday home, find out about local permits and regulations before buying or you may find renting out is restricted.
Also look at the best way to own the property for tax purposes – such as joint ownership with a spouse or through a company.
Buying A Property Abroad For Expats FAQ
Buying a home broad is straightforward for thousands of British expats, but for a few the experience is unpleasant.
The same things seem to go wrong in different countries, but it’s easy to keep things simple by following our golden rules.
Find out about the problems many expats face with our answers to the questions most asked about buying a property abroad.
How you capital raise to buy a home abroad depends on your personal circumstances.
Some have the cash to buy outright, others have a deposit and look for a suitable mortgage.
You will need enough to cover a deposit and the add-ons, like local taxes and legal costs that can easily add 25% to the purchase price. Then, there is any refurbishment and fitting out that is needed.
One way to get the cash is to raise capital from the home or buy to let property you are leaving in the UK. Many expats buy new because the developers arrange a mortgage to go with the sale.
Your independent lawyer should have no business or personal connections with the seller and should clearly explain the costs to you – along with advice if they are fair and reasonable.
If you are out of the UK for more than six months and rent out residential or commercial property, you should join the Non-Resident Landlord Scheme.
Not registering means your letting agent or tenant must deduct basic rate income tax from any rents collected.
If you sign up, instead of agents and tenants keeping back rent, you are paid gross and declare the earnings on a self-assessment tax return by January 31 following the year the rent was received.
The Foreign Office publishes a few guides to buying property abroad, but if you want detailed tailor-made advice, you should discuss your purchase with an independent lawyer practising in the country where you want to live.
Instead of buying a finished newly built home, a purchase is called off-plan if the home has yet to be started or building is underway.
Typically, a buyer views the plot or similar properties by the same developer and looks at the plans, hence the name off-plan.
Buying an uncompleted home comes with risks.
In some cases, developers have gone bust before building finishes or do not own the land they are building on and buyers have lost their deposits.
You can safeguard your money by following the tips above for buying an off-plan home abroad.
The Association of International Property Professionals (AIPP) is a trade body with a code of conduct but no legal power to compel members to settle complaints.
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