Six tips to consider when buying a property abroad
1 – Be sure you are clear on the exact purpose of your overseas home before you purchase it
The ideal location of the property will differ depending on whether you are looking to make money through rental yields, capital appreciation or for your own use. For example, recent data taken from the research department at idealista.com shows that Lérida, located in Western Catalonia is he location in Spain which currently offers the best average annual rental yields (6.3 per cent). However, according to a recent report carried out by Sociedad de Tasación property prices in the country are currently rising fastest in Seville (3.4 per cent in the year to April 2014).
2 – Learn how the purchasing process works in the country you are looking to buy in
Be aware of foreign property taxes (Photo via discoverspringtexas.com)
A property may look great value at its given price, but does this price include ‘hidden costs’, such as property taxes, stamp duty, agent fees, legal fees, etcetera. Always take legal advice – even if you are told you don’t need it.
3 – Check to see whether there are any financial factors that could affect potential profits
(photo via completefrance.com)
Items such as Capital Gains Tax (CGT) or taxes on rental yields is often the devil in the details. For example, when selling a second property in France, you will need to pay CGT – meaning you will not recover the full sales price. It’s worth noting, though, that until the end of August, second home owners in France are currently able to take advantage of a 25 per cent reduction in the CGT when selling a property.
4 – Beware of statistical data
(Photo via pelfusion.com)
While this can be useful in giving you a rough idea of how a property market is performing in a certain area or country, just because recent data shows that average property prices in Dubai increased by 33 per cent year-on-year in the first quarter of 2014, this does not necessarily mean that your Dubai property’s value will increase at the same rate. Your property is more likely to increase in value if it is located in a popular destination/resort – but there is also more likely to be other people selling similar properties at the same time you are.
5 – Don’t bank on becoming rich overnight(Photo via bubblews.com)
Property markets have changed considerably since the early noughties when quick gains were readily achievable. Investing for profit should be considered a long-term strategy. Research the country you are looking to purchase in, and look to see if there are any future developments planned that could increase interest in that country – for example, EU membership, low-cost flight routes, top sporting events, etc.
6 – Protected your Currency ExposureProtection your Currency Exposure – (Photo via online-museum.co.uk)
Finally, be aware of the boost a well time currency exchange could have towards the type of property you wish to buy. When exchanging large lump sums, even only slight fluctuations in the currency exchange markets can have a huge impact on the amount of money you’ll receive.
For example, if you’re looking to buy a property in a Euro Zone country, then over the past 12 months if you had exchanged £150,000 for Euros at the point when the exchange rate was at its lowest point (August 2013) then you will have received a total of 172,650 Euros. However, an exchange of the same amount when the market was at its highest point (February 2014) would have netted you 182,850 Euros – more than 10,000 Euros towards your purchase added for a bit of forward planning.
Foreign exchange companies, such as Halo Financial, understand why the exchange rates are moving and just what impact this has on your currency transaction. What’s more, they can also explain how to make your money go further and give you a range options on exactly when you wish to exchange, and how much you should exchange at a time.
Overseas property guide – Buying tips from Halo Financial