Overseas property

Overseas property have yielded spectacular gains over the last few years. Cashing in on a strong pound, UK citizens have been buying into many markets in which, by UK standards, property prices have appeared relatively cheap. These have included evergreen favourites such as Spain and France as well as more speculative emerging markets such as Bulgaria, Romania, and Estonia. With property prices going up around the world, most overseas property have proved profitable. And this has been especially so in the EU accession countries. Many overseas property are bought with both profit and personal use in mind, with buyers looking for capital growth, rental income, plus the opportunity to use properties as holiday homes – and perhaps eventually as retirement homes. Recent surveys have consistently shown that millions of British people aspire to own overseas property. First time buyers, frustrated by high UK prices, have seen overseas property investments as a way of gaining a foothold on the property ladder, while the country’s very many buy to let landlords see overseas property as a means of diversifying their holdings.

Homes overseas

Of course, buying homes overseas is not without its problems. First there are often language difficulties to overcome, and unfamiliarity with local laws and customs, and with foreign banking and currency exchange requirements. When buying homes overseas or abroad the registration of ownership can be less organised, and reliable, than in the UK. In many systems the process of transferring ownership must be placed in the hands of a notary – who will be a government official. His or her interest will be mainly in seeing that the paperwork complies with the law. This means those buying homes overseas or abroad are always advised to appoint their own English speaking lawyer with specialist local knowledge. The costs associated with homes overseas or abroad can also be substantially higher than UK property investors are used to paying, with stamp duty, agents’ and notaries’ fees, registration fees, and VAT bills to meet.

Property abroad

Letting property abroad can also bring difficulties for owners living hundreds, perhaps thousands of miles away. This is especially so for property abroad bought mainly with the holiday let market in mind. Here, the constant coming and goings of tenants mean there must always be somebody on hand to deal with minor problems, with exchange of keys, cleaning and other such issues. As in all property investment, finding a good location is essential when buying property abroad. In the case of holiday lets this will include closeness to airports and other forms of transport as well proximity to leisure, sporting and other facilities. So the key to success in buying property abroad is good and thorough research, caution, and involvement of trusted professional advisers.

Investment property overseas

With stock markets in the doldrums and pension schemes suffering, it is hardly surprising that many have turned to investment property overseas for their long term security and prosperity. Property prices are less volatile than share prices and have shown a relentless tendency to rise over a long period. Taking account of both rental yields and capital appreciation, returns have been high in both the domestic buy to let market and for overseas investment property overseas. For investment property overseas there are additional logistical problems to overcome and uncertainties to satisfy. Against this there are more opportunities to benefit from personal use of an investment property overseas.

Off plan developments

Many overseas property investors have chosen to buy houses and apartments that are yet to be built - off plan developments. There are both advantages and disadvantages.

The principal advantage with off plan developments is that they are usually offered at a discount. In deed, many investors have found they have been able to sell their off plan development property at a profit as soon as it has been completed.

It is usual for investors in off plan developments to be required to put down only a relatively small deposit to secure a property, sometimes with favourable finance terms also available.

The disadvantages of investing in off plan developments include not being able to see the property prior to purchase, the wait involved and the possibility of delay. Because of the inherent uncertainties with off plan developments – including the continuing financial viability of the developer – it is important for purchasers to take particular care over contracts and with completion dates and specifications.

Currency exchange

Whether buying off plan, a completed but new, or a previously owned property, it is almost certain UK buyers will have to exchange money – possibly a considerable amount into a foreign denomination. currency exchange can be a significant cost and it pays investors to shop around.

Many currency exchange specialist firms claim they can make major savings on the exchange fees charged by banks.

Another issue for overseas property investors to consider is the likely ease of repatriating money when they come to a sell their properties. Some countries place limits on currency exchange when taking money out of the country. And in many others there may well be difficulties if the initial currency exchange into the national currency has not been declared and reported properly at the outset.

Land investment

land investment is sometimes an attractive alternative to investing in residential property. Undeveloped land will generally be much cheaper than property investment, and land investment can yield returns as local prices move upwards.

But as always there are traps for the unwary. Some countries ban or discourage agricultural land investment by overseas investors, and some prohibit ownership of any land by such investors. Planning laws differ widely from country to country making the prospect of land investment development gains equally variable.

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