How to buy a house abroad

The UK is far from alone in suffering house price falls over the past year, so if you're buying abroad you might be able to pick up a bargain!

Have you ever seen A Place in the Sun: Home and Away?

It's a spinoff of A Place in the Sun, with a couple caught in two minds between buying a property in the UK or one abroad. Nice simple premise, easy entertainment for an hour (bar the woman who helps them look at the foreign properties, who is unspeakably irritating).

But what if you are in a similar position, tempted to buy in Marbella rather than Margate, or Dubai rather than Dudley, and don't have Channel 4 to help you?

Location, location, location

As with any property purchase, the biggest thing to consider is where to buy.

This is very much a personal issue, but it's essential that you do your homework on the local area, and its facilities. I'd also recommend speaking to local people about what it's like to live there (particularly off-season, once the tourists have gone home).

Changes in house prices in your chosen country are also important, especially if the purchase is merely as an investment rather than as part of an emigration.

Back in May, estate agent Knight Frank did some research on how property prices had changed over the past 12 months in various countries across the globe, which makes for some interesting reading. According to their research, here are the ten countries that have jumped the most in price over the past year.

Israel has been highlighted for some time as a great place for Brits to invest in property abroad, and with price changes like that, you can see why! Eastern Europe also appears to be performing very strongly.

However, it's the countries that have seen the biggest falls which are really eye-opening.

Not so long ago Dubai was hailed as an incredible, burgeoning economy and a great place to live and work, thanks to the weather and tax benefits. Things have clearly changed a little. The presence of Poland, Estonia and Latvia also shows that not everywhere in Eastern Europe is having a great time of it.

Not quite making the list, but still enjoying a tough time price wise are the usual favourites of Brits buying abroad: France (0.1% quarterly change, but -5.7% year on year) and Spain (-3% quarterly change, and -6.8% year on year).

On the plus side, such price falls make it cheaper for you to buy there!

Sorting out finance

If you are facing the prospect of organising an overseas mortgage, you have a couple of options.

A limited number of British lenders offer mortgages for use on foreign properties - unsurprisingly, Abbey offer mortgages on Spanish properties, for example.

However, you can also deal with a lender in your chosen country.

One issue to consider here is currency fluctuations. According to Conti Financial Services, a leading overseas mortgage specialist, in recent years many Brits have preferred to go for their mortgage in Euros, rather than Sterling, as it has worked out cheaper. However, since interest rates have been slashed in the UK, loans in Sterling are now more attractive.

Your use of the property can play a role in determining which currency to go for.

If you are planning to let the property out when you're not there, it probably makes sense to deal exclusively in the local currency - the rent, which will come in the local currency, can then be held in a local bank, and used to service the mortgage.

If you instead dealt in Sterling in this case, you would risk changes in exchange rates leaving you short on your mortgage payments.

The Approval in Principle

It's also very important to make sure that you have an Approval in Principle for your mortgage in advance. Firstly, it will make clear to you exactly how much you have at your disposal, as well as demonstrating to the local agents that you are a serious buyer.  

It also prevents heartache further down the road - the last thing you want to do is agree to buy the property, or hand over a deposit, only to find that you cannot raise sufficient funds.

Tax doesn't have to be taxing!

Tax issues should be one the main areas you research when buying abroad, as each country will have its own little legal idiosyncrasies for you to get your head around.

For example, the inheritance tax laws in France mean that your property will automatically be inherited by your children, bypassing your spouse! So you will need to compile a separate will.

If you rent out your property, you will also have to pay income tax, though thankfully many countries have reciprocal tax agreements with the UK, so at least you won't be charged twice!

Some things don't change

There are other areas which you should keep on top of in much the same way that you would when buying a property in the UK. For example, you should always get an independent valuation, to ensure you are aware of any possible problems with the property, while you should also make sure you are fully aware of the costs of dealing with things like the lawyer's fees, insurance, etc.

And if buying direct from a developer, it's imperative you do your homework on the firm's track record, as well as comparable properties in the local area.

Finally, never sign a contract that you don't understand - make sure you are 100% comfortable with everything in any contract you sign (making sure you've read it is a good start!).

Stick to specialists

I would also emphasise the need to get specialist help.

It's one thing to go it alone when buying in the UK, but if you are buying a property abroad I don't see how you can possibly do it without utilising the expertise of overseas mortgage specialists, as well as lawyers and surveyors who are experienced in your chosen country.

Buying a property outside the UK is a big step into the unknown, so I think you should ensure you have support from people that have been through it all before.

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