With BritainÂ’s housing market experiencing the chill of autumn, now could be the time to think about buying a home abroad.
The Office for National Statistics says property owned by Britons overseas is now worth £23 billion – four years ago it was £11.1 billion – with Spain, France, Portugal and Italy still the locations of choice. Emerging markets like Bulgaria, Hungary, New Zealand and the US are still small by comparison, but growing rapidly.
And these figures are certainly underestimates because they only apply to those Britons who have registered to rent and so pay tax on their foreign properties. Literally hundreds of thousands of others have either failed to inform the Inland Revenue or Customs & Excise or keep their properties for their own use.
“But despite the immense popularity of buying overseas, few mortgage lenders in Britain are happy to help,” cautions Liz Symes who runs Connect, a mortgage broker that can arrange loans for homes in over 30 different countries.
Many people buy their properties outright by releasing equity from their own homes, inheritance or other means. However, Abbey, HSBC, Nor-wich & Peterborough and Woolwich are willing to lend in parts of France and Spain, but most other purchases require specialists within the country. Several lenders have offshore subsidiaries, but always take advice on the tax considerations from lenders if you are a UK citizen and not based abroad.
Base rate boost
In most cases mortgage lending rates are influenced by the risks associated with a particular country, the complexity of a purchase and how well a property is expected to hold its value over the long term.
In Western Europe, rates are typically offered at 4.5 per cent or 5 per cent because the risks are considered small, but in less mature markets the cost will be more.
Broker Connect offers rates for Hungary at 5.6 per cent, Bulgaria at 7 per cent and Croatia as high as 9 per cent, for example.
“One factor is competition – as a market becomes more popular with buyers, so more lenders start operating and that can lead to reductions in rates as they compete for more business” says Symes.
High capital appreciation in some parts of Europe – 5 per cent in Italy to around 15 per cent in parts of eastern Europe – are also extremely attractive, compared to Britain’s housing market stagnation, but getting impartial knowledge on overseas markets and realistic property values remains difficult.
Common sense
“People are shrewd and hard-nosed at home but are suddenly ruled by their heart abroad,”. says Simon Conn of Conti Financial Services, which arranges mortgages for homes in 29 countries.
“People hate UK estate agents but suddenly the one in Croatia is their best friend. It’s madness,” says Conn. He adds that poor legal regulation and financial scrutiny makes buying overseas countries a minefield for the unaware.
He says the first stop must be to get an independent lawyer who speaks English as well as the language of the country where you are buying. “Ensure he or she trawls through all documentation,” demands Conn, who says that there are legal and financial pitfalls in every country, especially Eastern Europe.
Conn singles out Croatia. It has “no legal organisation or government body regulating ownership. No one knows what they’re doing or who owns what,” he says, although Croatia is by no means alone in having eccentric practices that can catch out British buyers.
The advice is simple – get an independent survey, ensure a property’s ownership is clear, use independent lawyers and a mortgage broker for the best deal.
Then, sit back and enjoy.
