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Buying overseas property

Find out everything you need to know about buying a home abroad, from where to find properties to the costs to factor in.

In this article
How to find an overseas property Timeshares Video: Laura Hamilton discusses buying 'A Place In The Sun' Buying a property in a different currency The legalities of buying a home abroad
Tax on overseas property Emigration Letting out overseas property The costs of owning overseas property Get personalised advice on remortgaging your UK property to buy abroad

Turning your dream of buying an overseas property into reality is exciting, but usually pretty complex.

Whether you're looking for a fresh start in a new location, retiring to sunnier climes or buying a holiday home to use and let out, you'll need to be clued up on the ways in which buying abroad differs from the UK.

This guide explains the basics of buying abroad, and links to other guides that focus on specific aspects of overseas property ownership.

Buying abroad?

Which? Mortgage Advisers can help you remortgage your UK property to release cash for an overseas property purchase. (Unfortunately they can't advise on overseas mortgages.)

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How to find an overseas property

There are several places where you can start house-hunting:

Online property portals

There are overseas sections on many well-known property portals, including Rightmove, Zoopla and OnTheMarket. Some of the more high-end UK estate agents, including Knight Frank, Hamptons International and Savills, also sell overseas property.

Browsing these websites will give a good indication of what's on the market in the area you're looking to buy.

Local estate agents

You can visit local estate agents when you're actually in the area you want to buy in, or find them through trade bodies such as the Association of International Property Professionals (AIPP).

Spend time talking to them about how the market has changed over the past couple of years and try to get some tips on local neighbourhoods. They may offer insider knowledge on the areas on the up - and those to avoid.

However, you should always take what estate agents say with a pinch of salt. Ultimately, they're trying to sell you their clients' properties, whether they're in the hottest of hotspots or a languishing locale.

Talking to local residents could be far more eye-opening, and of course nothing is as valuable as extensively exploring the area for yourself.

Exhibitions

Visiting shows like A Place In The Sun Live can be really useful for finding out about different destinations and meeting developers, lawyers and financial advisers.

You'll be able to attend seminars where you can learn more about the process and meet people who've already bought in the country you're interested in.

You can also arrange a trip to your desired area with an agent who will take you on a tour and show you potential properties.

Developers

Developers often advertise to UK buyers through the press or on their own websites. They'll either be selling newly built homes or off-plan properties which have yet to be finished.

Research the developer's reputation and, if possible, visit another development it has recently completed and talk to the residents before signing on the dotted line. 

If you do go ahead with an off-plan purchase, make sure you get legal protection. A well-negotiated contract should set out a clear payment schedule and clarify what the developer is promising.

It should also provide a bank-backed guarantee that if the builders go bust the job will be completed to the same standard at no extra cost to you.

  • Find out more: our guide to buying off-plan is aimed at people buying in the UK but contains lots of advice that will be equally relevant to an overseas purchase.

Timeshares

Buying a timeshare is a popular alternative to buying your own property. With a timeshare, you 'own' the right to stay in a property for a set period of time each year - usually at least a week. 

In many cases, rather than a specific house or apartment, you'll be buying time in a particular resort or group of resorts.

This can be a more affordable way to get a holiday home, especially if you're only planning to spend a week or two abroad per year anyway, but aggressive and misleading selling practices have given the industry a bad name.

Businesses that sell timeshares have been criticised for their high-pressure sales tactics, sometimes incentivising potential investors with free holidays, during which they're bullied into buying.

Some of the dodgier companies have failed to make investors aware of the full costs of ownership and increasing monthly maintenance fees. Some timeshare contracts even contain clauses stating that fees must still be paid after you die, leaving your descendants with a costly timeshare that they're unable to get rid of.

If you're considering buying a timeshare, make sure you have the contract vetted by a solicitor first to avoid any nasty surprises. 

Video: Laura Hamilton discusses buying 'A Place In The Sun'

In our four-minute video, A Place In The Sun presenter Laura Hamilton shares tips on overseas finance and things to consider if you're buying a holiday let. You can read the full interview here.

Buying a property in a different currency

When making an overseas property purchase, it's likely you'll need to pay in the local currency. 

Though many UK bank accounts allow you to make payments in currencies other than sterling, most of them will charge high conversion fees, which will add up quickly when you're spending a large amount. Even if they don't charge these fees, their exchange rates are unlikely to be good. 

To avoid this, it's best to use a specialist currency broker who can offer you lower fees, and an exchange rate closer to the 'bank rate' - which is the best rate available. Among these specialists are TransferWise and Caxton FX.

You can save more money by choosing to convert when the exchange rate is favourable to the pound.

The legalities of buying a home abroad

If you've bought a house before, you'll know there are a number of legal requirements you have to satisfy. Buying abroad is no different. 

In fact, since foreign countries have laws you may not be familiar with, it's imperative that you pay even closer attention to your legal responsibilities and the paperwork. 

Notaries and licences

Every country's property system has its quirks, but some are quirkier than others.

In some countries, you will have to use a notary - an impartial government representative - to oversee overseas property transactions.

Some places, including certain areas of Spain and the Canary Islands, require you to have a licence if you want to rent your property out.

Many nations have rules preventing foreigners from buying property, or restricting how much land they can own. 

To make sure your purchase is legal, it’s essential to employ an independent lawyer, with no connection to a developer or agent, who is fluent in both your own and the local language. 

They should have an in-depth understanding of property law in that country, including how it relates to non-residents. It makes sense to hire someone based in the country you're buying in, as much of the work will be done there.

Tax on overseas property

Since your tax obligations will differ from country to country, it's important to seek legal advice to find out exactly what you'll have to pay. 

If you're letting the property out, you will have to pay tax on rental income. In most cases, you'll need to declare this income for tax purposes abroad and in the UK. Visit our guide to how rental income is taxed for more information.

International agreements known as double-taxation treaties exist to ensure that you don't pay the same tax twice - but it's unknown what will happen to these after Brexit.

You will have to pay capital gains tax when you sell the property if it’s not your main home, though again the current agreements mean you can claim relief if you pay this twice in some circumstances. Inheritance tax could be payable by your heirs when you die, but double-taxation treaties could make a difference here, too.

You might also be liable for the local equivalent of council tax.

Emigration

If you have decided to emigrate, you should research your tax, pension and healthcare requirements as early as possible.

If you're moving to a country outside the EU, you'll need to look into the rules it has for foreign residents. In many cases, you will have to apply for a visa before you can move. 

Currently, you can live and work anywhere in the EU without having to apply for a visa or permit. After Brexit, this may change, but the details are yet to be finalised. 

Letting out overseas property

You can make money by letting your overseas property out when you're not using it, but it's important to factor in the time and costs involved. 

If the property you're considering buying is already rented out for some or all of the year, ask the current owner about yields and how many weeks a year it's typically occupied to give you an idea of the returns you can expect. 

If it's not currently let out, research how much it costs to stay in similar local properties.

Don't forget to factor in the costs of maintaining and cleaning the property between guests, and the time you'll need to spend advertising the property, managing bookings and communicating with guests.

Of course, you can choose to pay someone to handle this instead. A full property management service could cost around 20% of your gross rental income.

If your primary motivation for buying overseas is investment, don't get sucked in by claims of huge capital growth and rental yields. As with any investment, it is possible to lose money. 

The costs of owning overseas property

Ongoing costs

There's still spending to be done once your overseas property purchase has gone through. It's important to factor ongoing costs into your budget.

If you're emigrating, think about the local cost of living, as well as utility bills, insurance and general maintenance.

If you're letting the property out, there are still maintenance and insurance costs to think about, plus potential agent fees.

Converting your cash

Moving abroad, or even paying the bills on a rental property, will require you to spend foreign cash.

This isn't as much of an issue if you're earning money or receiving a pension in the local currency. But you have two main options if you're not: 

  • Buying currency - converting your money into euros, dollars, or whichever currency you need in one transaction will mean you always have funds when you need them. If you opt for this method, check the exchange rate you're being offered against the 'bank rate' to ensure you're getting a good deal. 
  • Using a card with no overseas payment fees - you also have the option of using a British credit card that charges no, or low, currency conversion fees. Our guide to the best travel credit cards has more on this.

Overseas mortgage

Getting a mortgage for a property abroad can be even more complex than applying for one in the UK. For starters, you'll have to decide whether to borrow with a UK bank or one in the country you're buying in.

You may also have to pay a bigger deposit; it's common for British buyers to pay a 30-40% deposit on properties in Spain, for example. 

Get personalised advice on remortgaging your UK property to buy abroad

If you're planning to buy an overseas property, remortgaging your current home is one way to raise the funds.

The team at Which? Mortgage Advisers can give you impartial, whole-of-market advice on this, and find the best remortgaging deal for you. Call them now on 0800 197 8461 or fill in the form below for a free callback. Sorry, the team is unable to advise on overseas mortgages.

Correct as of date of publication.


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