Expats can find buying a property overseas a daunting prospect as many countries have strict rules about buying and owning a home that are different from those in the UK.
If you are considering a move, read on to find out about the best way to find, finance and buy a home abroad.
Buying a home abroad
Long-distance house hunting is easy online and most familiar British property portal have overseas sections.
Other traditional sources of property advertising are also online and face-to-face, including developers, estate agents and property shows.
Buying off-plan from a developer – before a property is built – is often seen as a way to make a quick profit, but many expats have lost substantial amounts of money taking risks for high returns.
Following the financial crash, many developers went bust leaving homes unfinished after demanding big deposits from buyers.
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 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.
Consider buying direct from a developer as a sale would not generate commission, which could mean the way is clear to negotiate a discount.
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 as a tourist is not the same as 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
- As a family home while on assignment
- As a holiday home
- As an investment to generate an income 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 tourists look at property in a different way from a long-term resident.
If you are seeking an investment, look at rent, yield and if property values are appreciating as well as tourist facilities in the neighbourhood.
Take independent advice
Failing to take 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 leads to a conflict of interest which can result in the buyer losing money.
Never tie up with the lawyer suggested by someone who represents 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.
Get a list of costs
Hidden or unforeseen costs can ramp up the price of buying a home overseas by contributing a big percentage of the purchase price.
Always ask your lawyer for a full list of costs and disbursements you should expect to pay.
These expenses can add between 10% and 25% to the price of a property and make a real difference to an expat’s budget.
These are most of the extra costs to expect, but the list is not exhaustive and may vary between different countries:
- Tax advice charges in the UK and overseas.
- If you pay tax in Britain, you will pay capital gains tax in the UK when you sell abroad and possibly a wealth tax where the property is located
- Surveyor and valuation charges
- Mortgage arrangement fees to the lender and broker
- Foreign currency exchange fees when transferring a deposit overseas
- Conveyancing charges
- Local property taxes
- Expenses for shipping furniture and personal possessions overseas
- Costs of translation
- Utility bills
- The cost of wills in Britain and any other country where a home is owned
Remember that a lot of these expenses are due on completion – and property running costs will add to the bill over time if the property is occupied or not.
These include local authority taxes, insurance, utility standing charges, licences and maintenance.
Cash in the bank to cover two or three months of costs is a good idea.
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.
Many countries are federal states, which can mean different local laws apply to property ownership.
Mortgages for expats
The traditional way for an expat to buy a property overseas is for them to refinance their home and to spend the proceeds on buying the foreign property outright.
If a mortgage is needed, a local bank must step into the deal as lenders have legal problems with securing a loan against a property in a foreign country.
Overseas banks tend to less comfortable with large loans, so rather than expecting up to an 80% loan-to-vale (LTV) that a UK lender may offer, work on a 50% to 60% LTV.
Safeguard your money when buying offplan
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 fail to complete building.
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 fails to 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 detailing 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
Developers will try to avoid these conditions, but they standard terms in the trade.
More about buying overseas property
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.
The AIPP publishes some free property buying guides.
Don’t forget to check publication dates online to make sure legal and tax information is still relevant.