A Guide to Buying a Holiday Home Abroad
Whether you are buying a property abroad in a beautiful destination to jet off to for holidays or to rent it out, there are several important factors to consider when it comes to overseas property investment.
In addition to the location and property type, you will need to consider how to finance your purchase, any tax implications, legal restrictions, local rules and regulations and other risks that are associated with owning a home abroad.
So, if you’re considering buying property abroad, this article should help with the key topics and the top locations to buy a holiday home overseas.
What are the benefits of buying a holiday home abroad?
Buying a holiday home abroad can bring many benefits, but it often depends on your own circumstances and motivations for buying. Here are just a handful of common reasons they can be a wise investment:
- If you’re looking to spend extended periods abroad or a quick getaway in a destination you love, you have a home from home to visit when you want.
- You’ll save money on future holidays as the main cost of accommodation is no longer a concern.
- When you’re not there, you can rent out your holiday home to generate extra income from paying guests.
- It can become a good retirement option for later on in life.
- If you invest in a property price growth hotspot, you may achieve a healthy return on your investment when you sell.
What are the cons of buying a holiday home abroad?
- Overseas countries are well-known for their high levels of bureaucracy and laws, which can lead to delays when trying to buy a property.
- UK buyers need to be fully aware of the tax rules and legislation surrounding a potential property purchase overseas so that they can plan and budget for them accordingly.
- Some areas are prone to natural disasters, including flooding, earthquakes, storms, landslides and forest fires which all pose a risk to properties.
- Many countries have implemented stricter rules or forbidden renting out holiday lets in certain areas.
- You are potentially limiting yourself to the same holiday location, therefore missing out on the opportunity to discover other beautiful destinations.
- There are ongoing costs related to owning a holiday home, for example, taxes, utility bills, insurance, hiring a property manager, maintenance etc.
- Language barriers can be an issue when dealing with tradespeople or service providers.
- It can be difficult to sell the property in the future if there isn’t enough demand.
The best places to buy a holiday home abroad
Despite Brexit, the European Union remains one of the easiest places for British citizens to buy property. That’s why European countries top the list of places to buy property abroad every year.
The best place to buy property abroad will come down to what you’re hoping to get out of the investment. Do you need a family-friendly location or are you after a slower pace of life? Are you looking for an English-speaking expat community to get involved with or do you want to embrace the local culture?
The location you choose may also be influenced by how far you’re willing to travel, the cost of living, and the weather.
Spain
Spain is the most popular destination for UK buyers, with its beach towns, sunny climate, vibrant culture, and excellent cuisine on offer all year round. A continuous high demand for holiday lets in popular locations like Torrevieja, Marbella, Costa del Sol, Alicante, and Mallorca also provides holiday let owners with a reliable income.
Spain offers a range of property prices, from affordable apartments in coastal towns to luxury villas in high-end areas. It also has one of the lowest cost-of-living rates in Western Europe.
France
Buying property in France is another popular option for Brits looking to purchase property abroad. With its world-famous cuisine, iconic landmarks, and rich cultural heritage, it’s not hard to see why. France also offers a stable economy and is just a short hop across the channel, making it easy to travel to.
Property buyers from the UK have a varied choice of settings for their potential purchase, from seaside-based properties, chalets in the French mountains to cottages in rural, wine-making regions. The French property market is also well-regulated, providing a clear and legally compliant process for buying property.
Portugal
Portugal has become an increasingly popular holiday home destination for travellers searching for a mixture of culture, welcoming communities and a warm climate. With a choice between pretty coastal towns, luxury villas in the Algarve, and bustling cities like Lisbon and Porto, there’s something for every kind of property investor.
Italy
Italy has a great deal to offer visitors, with its delicious cuisine, stunning architecture, rich culture, and pleasant climate. However, compared to other countries on this list, buying a holiday home in Italy can be more expensive. Some of the more desired locations include Tuscany, Umbria, and the Amalfi Coast.
Cyprus
As well as the hot climate and lower cost of living, holiday home buyers are drawn to Cyprus due to its high quality of life and low taxes.
Greece
With its collection of picturesque landscapes, beautiful beaches, and stunning islands, Greece is a fantastic place to buy a house. Locations like Santorini and Mykonos on the Cyclades Islands are known for their luxury homes, whereas Corfu and Kefalonia are great options for more affordable real estate.
Top tips for buying a holiday home abroad
Do your research
There’s more to researching where to buy a holiday home than finding a beautiful location. You’ll need to investigate how prices differ according to the type of property you are looking for. What’s available for your budget may shape your decision on the locations and type of property you’ll have to consider.
If you’re planning to rent out your holiday home, are you allowed and is there enough year-round demand to generate enough income to cover your expenses?
Some countries have restrictions and laws for foreign buyers looking to buy a house. The process can be bureaucratic and long.
You’ll also need to research the background of the location. Is there a history of natural disasters – such as earthquakes, floods, and storms? These can not only damage your property and cut your letting season short but also lead to increased insurance premiums.
If the property is on a development, ask the developer to show you some projects that they have completed and talk to other owners to see if they have had any problems you should be aware of before purchasing.
Finding an overseas property
There are several resources to use when narrowing your search for a property overseas.
The most popular property website to start your search is rightmove. Once you’ve narrowed your property search, consider contacting the local estate agent who is advertising the property. They’ll have a knowledge of what’s available in the area, are familiar with the rules around purchasing a property and can often refer reputable companies to help.
Another option is to work with a buyer’s agent who for a fee, will use their local knowledge, expertise and contacts to find properties that match your criteria.
You can also turn to forums and Facebook groups for advice and recommendations on purchasing property in your desired area. By speaking to people who have already bought, they can share their experiences and tips.
Before you use any local services, it’s a good idea to seek out customer reviews and unbiased feedback from previous customers.
How much does buying property abroad cost?
Thorough planning and budgeting are crucial when investing in property abroad. There are several costs to factor in beyond the purchase price, including:
- Furniture and shipping
- Mortgage broker fees
- Surveyor fees
- International bank transfer fees
- Legal fees
- Tax adviser
- Exchange rate fluctuations
- Holiday home insurance
- Ongoing maintenance costs
- Property manager
- Travel costs
- Utilities
- Community fees (if you’re buying on a development)
- Capital gains tax when you sell
It’s a good idea to have a contingency fund to cover unexpected costs.
Obtain an independent valuation
Always obtain an independent valuation from a professional surveyor, even for a new build property. This will highlight any problems with the building, foundations, the materials etc.
Use an experienced lawyer
There have been some horror stories in recent years where properties have been constructed illegally, with the wrong (or no) permit and where the seller doesn’t own the title deeds. A lawyer familiar with local property laws and regulations can guide you through the buying process, ensuring all the legal aspects are correct.
It’s recommended that you avoid using a lawyer recommended by the seller, developer or estate agent. Make sure you take advice from an independent, English-speaking lawyer.
How to finance an overseas property purchase
If you’ve got enough savings, you can buy the property outright. This means you won’t need to worry about paying interest on a mortgage. Alternatively, you can take out a mortgage for overseas property in the UK or with an overseas provider.
Many UK high-street banks offer an international mortgage service, so you might be able to use your current bank. The benefits of using a UK-based mortgage lender is that everything is in your own language and the process will probably be quicker as the lender will have access to your credit history.
If you opt for an overseas lender, you can use a specialist mortgage broker to simplify the process. Overseas lenders may have more mortgage options at better rates, plus they have knowledge of the local housing market, local laws and service providers. However, factoring in exchange rate fluctuations is essential, as they may affect your repayments.
It is important to note that the FCA does not regulate property transactions outside the UK, so you may prefer to use a UK-based broker to minimise risks.
Whether you go for a UK or overseas mortgage, take your time to compare mortgage products that best suit your needs and capabilities. Pay attention to the interest rate and repayment period, fees for setting up the mortgage, plus any early repayment or cancellation fees.
Securing an exchange rate
However you fund your overseas property purchase, you’ll probably need to transfer large sums of money overseas. It’s crucial that you secure the best exchange rate to make your money go further and reduce the risk of currency fluctuations.
A currency expert can assist you in the execution of your payments to lock in an exchange rate or you can wait for a specific rate to try and get the most out of your money using a market order.
How has Brexit impacted buying property abroad?
The main impact has been on how long UK citizens can stay in the EU. UK citizens are restricted to 90 days at any one time during a 180-day period. You need to consider the implications of this if you intend to visit your property for several months of the year and also travel to other EU destinations.
Protect your investment
Once you’ve found the perfect property, you’ll want to insure it to help protect your investment from the many perils that overseas properties face. At Schofields, we provide holiday home insurance in Spain, France and Portugal when occupied, unoccupied and holiday let.