Whether you’re looking for your own holiday hideaway or wanting to expand your financial portfolio, the thought of an international property investment has undeniable appeal. But making such a huge financial commitment overseas can be daunting and is almost always more complicated than buying locally. Armed with the right knowledge, you can minimise the investment risks and maximise profits, not to mention enjoyment – for years to come. We asked the A Place in the Sun presenter, Scarlette Douglas, to answer some of the questions you may have on buying property abroad.
What are pros and cons of buying property abroad?
It always depends on the motivation for buying. A holiday home is a place to call your own in a rapidly rising marketplace. Meanwhile, depending on the location, a permanent home may provide better for the needs of your family in a wonderful climate, with low crime rates, excellent schools, and a host of activities that you can enjoy year-round thanks to the weather. In rentals, a long-term property provides a stable income in a market that is increasing in value. Short-term holiday lettings have better financial gains, but these are always offset by booking fees and the responsibility of the upkeep. The renovation and resale market is currently booming, especially at the higher end. There is a surge of would-be investors, hoping to flip their investment for profit, especially those coming from areas where property prices are now so high that the opportunity to do this has been removed.
The cons vary across the motivations: long-term rentals can result in bad tenants (as indeed they can in this country), short term rentals are hard work, a permanent home will only be an option if you can maintain your lifestyle abroad, and renovations are only sensible as long as the market is rising in value.
What are your top considerations when choosing a property?
The top consideration for buying a holiday home is always location. Some areas perform better than others, some are resistant to market forces. A view is also important – most buyers in beautiful countries are adamant about having one and the lack of one can affect both re-saleability and price. Being within walking distance of amenities often crops up, but it’s not especially important if you get the location and the view right. Consulting a property agency in the local area is always helpful.
How do I go about getting a mortgage for a foreign property?
There are two tried and tested ways, first is to re-mortgage any existing property in your home country, where there is ample equity to do so. This is often the easiest way as you will have a history with the lender and can easily prove your income.
The other option is to take out a mortgage in the country where the property is located. This can be more difficult, and in most cases a maximum of 50 per cent of the property value can be mortgaged. This does not cover the 10 per cent purchase costs, which need to be in liquid form, too. Effectively this reduces the mortgage amount to 40 per cent.
Are there ways to avoid exchange rate fluctuations affecting repayments?
The short answer is no. If your income is paid in a different currency to the provider of the loan, then there will always be fluctuations in exchange rate, this is controlled by the banks rather than the individual.
What additional costs do I need to consider?
This will vary depending on the country in which you are buying. In Spain, for example, you should budget for an extra 10-15 per cent to be paid on top of the purchase price, this is made up of 7 per cent transfer tax, 1.2 per cent stamp duty, between 0.5-1 per cent legal fees, plus the appropriation of any costs already paid by the seller (for example community fees). Mortgages will also come with both arrangement and survey fees.
On top of any finance monthly costs, you have community fees (if the property is part of a community), IBI (or council tax) – the cost of which is based on location and size of the property, plus BASURA which is the refuse collection tax.
If we choose to rent the property out, how will this be taxed?
You are taxed in your country of residence, so any income would need to be declared on your tax return in your resident country. Whilst Brexit has caused some problems, the dual tax arrangement is still in place for British owners of properties in Europe, meaning that you are only liable for taxation in your country of residence. Agreements can and do change, though, so it is always best to seek professional advice from a tax advisor.
How has Brexit affected buying property in Europe?
Obviously, it has only affected the British buyer – it has not impacted any other buying market. For example, pre-Brexit, the British buyer accounted for only around 8 per cent of Spanish property purchases, so there has been no impact on general prices or demand.
The new rules limit the time you can spend in the property or country unless you apply for residency. But the rules on residency have also changed, and you now have to meet income thresholds and provide your own private healthcare.
Under the 90-day rule you can still buy property for your own holiday usage, but Brexit has taken away the ease and freedom the British once had to buy a permanent home abroad. If, however, you are spending more than €500,000 unaided by a mortgage or loan, you will be entitled to a ‘golden visa’, which offers the same benefits enjoyed by residents in other EU countries.
How do I find independent advice on all the legal aspects?
By talking with and discussing your options with a lawyer in the same country. Most speak perfect English, or have English speaking staff. Obviously, all documentation will be provided in their language, but you should automatically get an English translation.
What are your top tips on making the process as smooth as possible?
Firstly, if something sounds too good to be true, it probably is… this is a rule that most people practise in their own country and then forget when they move abroad!
Always use a knowledgeable agent who can show you the best properties and guide you through the process. The same advice goes for lawyers when the purchase is going through.
When it comes to the big move, don’t forget that, because of Brexit, there are now import costs and VAT on anything you import into Europe, be it old or new, so don’t waste time and money bringing furniture with you. Many properties are sold furnished and whatever you don’t like can easily be replaced; you are sure to find beautiful shops selling furniture designed for life in the country where you are buying.
On the Market
The hottest properties abroad
Benahavis, Marbella, Spain
Without doubt one of the most spectacular villas to have been built on the Costa del Sol, this unique detached residence (above and left) is set within the exclusive, gated Los Flamingos community. Designed by renowned architecture practice, Tobal, it enjoys a privileged, front-life golf plot, boasting panoramic views over the coast and across to Morocco. The outside space has been designed to take advantage of these views – a vast terrace is home to a stunning infinity pool, complete with water feature. A pergola covered outdoor bar and barbecue area provide perfect space for entertaining. Inside, 12 luxurious bedrooms are spread across the three levels, with the two master suites enjoying access to private outdoor space. The custom-built Bulthaup kitchen is open plan to the main living space, and has been kitted out with the very best Gaggenau appliances. But perhaps the best feature of this very special home is to be found on the lower level – a state-of-the-art spa with a salt water treated heated indoor swimming pool, sauna and Hammam. Totally dreamy.
€20 million, Affinity Property Group (020 3930 9672; affinitypropertygroup.com)
Tourlos, Mykonos, Greece
St Tropez meets Ibiza on Greece’s most glamorous island, so it goes without saying that Villa Vista (previous page) offers style in spades. The ultra-modern home has a striking design, having been built into the landscape, and offering a sprawling southwest facing terrace. Undoubtedly the jewel in the property’s crown, the terrace is home to a well-equipped outdoor kitchen and a large infinity pool offering spectacular sea views. It’s the perfect spot from which to watch the sun set. And there’s oodles of living space, inside, too – the villa boasts six bedrooms and eight bathrooms spread across the main house and a separate guest cottage. And there’s a gym, home cinema and wine cellar catering to your every need. There’s no doubt you’ll have friends and family clamouring to come and visit if you can bear to share.
POA, Beauchamp Estates (+30 2289 02 47 97; beauchamp.com)
Albi, Tarn, France
The perfect proposition for anybody looking for a business opportunity as well as a new home, this stunning traditional stone property (previous page and right) is set within an area known locally as the Golden Triangle. Having been exquisitely updated by the current owners, it features an immaculately presented five bedroomed house, three gites, five separate bed and breakfast rooms, and a conference room. Outside, you’ll find beautifully maintained mature gardens, a heated swimming pool and a vast, covered terrace, while inside, exquisite original features include character stone flooring, exposed beams and an immense fireplace in the main living room. As well as holiday lettings, the property would be well suited to hosting weddings and yoga retreats and offers a fantastic opportunity for a lifestyle change with a ready-made business and marketing already in place. Look sharp.
Guide price, €1,207,500, Savills (+33 5 56 71 36 59; savills.com)