Ten top tips to find your new home in the sun
Don't let your dreams of living abroad turn into a nightmare. Do your homework, says Chiara Cavaglieri
Sunday 06 November 2011
A place in the sun is still a dream for many people, and others are willing to take an even bigger step by emigrating and leaving the UK behind. Official figures show that about 124,000 people emigrated last year, but buying property abroad can be a minefield.
Here are 10 things to consider before making that leap.
1 The location
Many of the big-name property portals have overseas sections, including Findaproperty, Primelocation and Rightmove, and you can find international property through UK estate agents such as Knight Frank and Savills. However, buying property abroad is about more than sticking with the area you like to visit during your summer holidays, so you need to look into the local facilities and transport.
"In the more popular areas of southern Europe where you've got a lot of choice, if you can afford it, pick somewhere near an airport," says Nigel Lewis from Primelocation. "It may be more expensive but is better for friends and family visiting and for renting it out. People don't want to spend their holiday stuck on the motorway."
Do your research: there are many horror stories of land-grab planning laws which caused many expats to lose their homes. Once you've picked an area, compare property prices over a period of time and find out if there are any new developments shooting up in that area. If there aren't enough buyers for them they could severely affect the price of your new home.
2 Getting an independent lawyer
Do not sign a contract before seeking legal advice and avoid using a firm recommended by an agent or developer. Get an independent lawyer who speaks English and understands local and international laws. They will ensure that nobody has a claim on the land your property sits in and that all the local planning rules have been adhered to. In some European countries you must use a notary to oversee the transaction, running searches and checking the title deeds, but you still need a lawyer to look after your interests. If you are buying off-plan, get legal help.
3 Choosing an agent/developer
Ask for references from previous buyers and find out long they have been in business for. Don't allow promises of guaranteed rental yields to push you into making a decision before you've ensured that you're dealing with a reputable company. Never hand over a cash deposit directly to the developer as there should be a third party (such as a bank) offering to guarantee the deposit.
4 Getting a mortgage
If you're not a cash buyer you can remortgage your UK home, although you do run the risk of losing it if you get into any trouble with repayments. Otherwise, you will probably need to arrange a mortgage agreement in principle from a local bank as only a few UK banks lend for overseas purchases. If you're borrowing abroad you will need to go through a specialist broker, but post-credit crunch it is much more difficult to borrow.
5 The exchange rate
Exchange rates will have a huge impact on the amount you pay between agreeing a price with the seller and paying the final sum. It may be worthwhile fixing the exchange rate by speaking to a foreign exchange specialist. Most currency brokers will allow you to fix the exchange rate for up to two years. Remember that if you rely on a UK pension in sterling, exchange rates could erode the value of that income so you may not enjoy the same standard of living.
6 Your tax liability
Don't ignore tax rules when buying abroad – it could take a significant chunk out of your budget. Property taxes, usually a percentage of the purchase price, vary widely from about 5 per cent in the US to 12 per cent in Spain and 15 per cent in Italy.
"On buying the property you may have to pay the equivalent of VAT (if it is a newly built property), stamp duty (if it is a resale property) or some other form of sales tax," says Paul Dimambro, the head of Hargreaves Lansdown Currency Service. "Local taxes, such as the country's equivalent of council tax, may be levied."
If you let the property you need to consider income tax, although if you choose a country with a double taxation treaty with the UK, you will be able to offset the tax paid against your British taxes. You may also need to pay capital gains tax when you eventually sell. Seek professional advice from a tax specialist.
7 Your pension
If you are retiring abroad or approaching retirement, you must find out how this affects your pension. You can have your state pension paid into an overseas bank account, but in some parts of the world (including Australia, New Zealand and Canada) your pension payments will be frozen, rather than increasing in line with inflation as it would here. You should take financial advice on whether to move any personal pensions with you or to leave them in the UK. Banking in many countries can also be expensive so keep this in mind when you're setting up an account.
8 Renting instead of buying
Don't think that buying is your only option. In many countries the local residents are more than happy to rent, so this may be the best route for you too. Even if you do want to buy and you're planning to move abroad permanently, you need to visit during different times of the year to get to grips with the local market.
"Estate agents don't like anyone saying this but it is a good idea to rent for at least a year before you move overseas. If you like the feel of the place and get to know what is going on locally, then buy," says Mr Lewis. Even if you're only looking for a holiday home, spend some time there to understand how the area works all year round in terms of services and weather.
9 The healthcare system
You need to investigate the health facilities available to foreign residents in your new country. Many countries operate a national health service. For example, in Australia there is Medicare, so you may be able to claim reciprocal care under our NHS. But if not, you will need either to pay for healthcare privately or take out a local healthcare plan.
10 An exit plan
According to a new study 107,000, Britons headed to Australia between 2005 and 2010, but 60 per cent of them decided to return home. To be safe, think about how long and how expensive it would be to sell up, checking fees, taxes and penalty clauses on your mortgage.
"That is why location is important. You want to buy in a good spot with great demand over a period of time so that you can guarantee a sale at a decent price. In difficult times the prime areas hold their value," says Christian de Meillac from Knight Frank.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
- 2 To help fuel their propaganda machine against the poor, our government has now decided to redefine the word 'welfare'
- 3 Black Friday 2014: Opening hours for John Lewis, Asda, PC World, GAME and Argos
- 4 Bill Cosby: Isn’t it obvious why his accusers have stayed silent up until now?
- 5 Jeremy Hunt: 'I took my children to A&E because I didn't want to wait for GP appointment'
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Revealed: How the world gets rich – from privatising British public services
Exclusive: UK approved £7m Israeli arms sales in six months before Gaza conflict
iJobs Money & Business
£Attractive: Citifocus Ltd: High calibre individual with significant product d...
£Negotiable: Citifocus Ltd: Leading global bank seeks experienced credit analy...
£Attractive Package: Citifocus Ltd: High calibre individual with a high degree...
£Attractive: Citifocus Ltd: High calibre individual with superior academics an...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens