Post financial crisis, the UK housing market remains in a bit of a slump, with slow growth in areas outside the capital’s booming property bubble. However buying abroad still remains as an exciting prospect for many Britons, whether this is purchasing a pad in one of our European neighbour’s such as Spain, France, Italy or Portugal or opting for a venture even further afield.
Location location location
Before you start looking, it’s worth having a few preferred locations in mind, and a basic checklist of your preferences, i.e. do you prefer living in a town or in the country, inland or at the coast, and do you want to be isolated or in the middle of everything? Take into account proximity to facilities including public transport, good schools, local health and social services, shops, bars and restaurants.
According to Richard Wray, Editor at The Overseas Guides Company, lots of Britons are discovering new areas within established Mediterranean destinations. “The lingering economic downturn and nervousness around the stability of banks has made Brits less adventurous when it comes to buying property in more exotic or emerging markets. In France, for example, the Languedoc is becoming increasingly popular ¬– it’s more affordable than the Riviera, gets lots of sunshine, has great air links and is close to the Pyrenees.”
Professionals and Paperwork
It goes without saying that the help of qualified professionals is a crucial factor when purchasing property aboard. You will need both a professional real estate agent and an independent lawyer, with excellent command of English and the native tongue, who will be able to deal with the endless stream of paperwork, rules and regulations exclusive to each location.
“Identify and stick with one good estate agent,” says Stephen Lahiri of Lucas Fox International Properties. “If you do this, he/she will effectively act as a buying agent. They will then be able to work on your behalf and show you all properties that are appropriate. This will cost the same as having multiple agents, as the commission is simply split between them. If not, the risk is that you have agents focusing on playing off against each other and trying to take you to other areas rather than truly identifying the best property for you.”
The paperwork involved in a purchase will depend on whether you are buying a property as a home or as a holiday-let or ‘business’ purchase. “You will have different insurance policies and different mortgages (and mortgage requirements)”, explains Terry Hobbs, Network Distribution Manager at EcoHouse group. “If you are using the property as a holiday let, you will normally have different tax implications, and in some cases you may even have to set up a company, or at the very least employ the services of a rental management company, to be able to let the property.” You also may need to obtain a rental license from the local town hall, and there will be income tax to declare.
Count the cost
Additional costs to the property’s agreed purchase price will vary depending on which country you decide to buy in. And some costs such as notary fees, payable in Spain, France, Italy and Portugal will be unfamiliar to UK buyers.
Other costs may include agency fees, legal fees, registry fees and mortgage costs, as well as transfer tax if you purchase from a private individual, or VAT and stamp duty if you decide on a new build.
“Transfer tax is a key payment which varies from country to country,” says Richard. “This is usually levied on the tax rateable value of a property, or in some cases on the value of a property and its age. Italy’s buying costs are particularly high thanks to buyers typically paying towards estate agency fees, usually around 3 per cent of the purchase price, with the vendor paying the same. However annual council tax is considerably less than in the UK.”
In total, additional costs in France and Italy will work out at around 15% of the purchase price, in Portugal around 10%, in Spain between 8 and 10% and in Turkey between 7 and 10%.
Most importantly, when it comes to costs, ensure all your bases are covered. Most pitfalls occur when buyers fail to consider every possible cost of buying and maintaining their property. The most common overlooked cost is the exchange rate fluctuation between agreeing a price of property in euros and completing the purchase a month or two later. There are also furnishing costs, rental management, and cleaning fees to think about.
The good news is that exchange rate fluctuation can be managed using a currency transfer specialist says Richard. “ Specialists such as Smart Currency Exchange are always advisable when exchanging and sending currency abroad to pay for a property. They offer much better exchange rates than high street banks and have clever ways of allowing you to secure an exchange rate when you find a foreign property, so you know how the price in sterling won’t change before you complete the purchase.”