Dream properties in the sun are becoming a costly nightmare with almost a quarter of holiday homeowners struggling to meet costs of ownership, according to new research.
Some 85% of overseas property owners say the cost of maintaining their property has gone up in the last 12 months and over a fifth, 21%, are struggling to meet the increased costs, according to a report from currency specialists HiFX.
Over a million Brits currently own a property overseas, with France and Spain being the most popular destinations. However the global economic slowdown has hit homeowners not only at home, but also abroad as the cost of maintaining a property has increased.
Whilst mortgage rates may have gone down for many owners, the overall cost of owning a property overseas, including local taxes, utility bills, maintenance costs etc, has continued to grow and the rising costs of ownership have been magnified by sterling’s depreciation and the continued market nervousness of an impending hung parliament following upcoming General Election.
Many property owners are also seeing their rental income from a holiday home hit, as the number of potential tenants decreases with more people opting for stay-cations in their home country, the report says.
HiFX says there are a number of ways property owners can reduce costs including protecting against currency fluctuations. Two years ago the average overseas property owner transferred £10,000 a year to meet maintenance costs, including overseas mortgage payments, and provide spending money when they visit their second home.
However as the pound has taken a beating against all the world’s major currencies, they now have to convert significantly more in order to meet the costs associated with their international property such as maintenance costs, mortgage payments, utility bills and local taxes.
For example, in October 2008, £10,000 would have bought €12,900. To receive the same amount of Euros today, a Brit has to transfer £11,896, almost £2,000 more.
People who bought a property in South Africa hoping to cash in on this year’s World Cup have been particularly hard hit as they are having to transfer an extra £7,000 to achieve the same amount in South African Rand.
‘People making regular currency transfers can set up a Regular Payment Abroad plan with a currency broker that allows you to lock into an exchange rate for up to 12 months ahead so you know know exactly how much is being transferred every month,’ explained Mark Bodega, Director at HiFX.
‘A Regular Payments Abroad plan also saves you forking out on commission and transfer fees. Banks typically charge up to £30 as a transfer fee on each and every transaction, up to 2% commission on the amount being transferred and, depending on the destination bank account, you may also be charged a further 0.5% receiving fee by the overseas bank,’ he added.
Those who are uneasy about fixing the exchange rate and are more bullish about Sterling’s future or those who are making international transfers on an ad-hoc basis should at the very least shop around for better exchange rates and compare the rates offered by their high street bank with a currency specialist, particularly one which offers an online service for smaller amounts of money, Bodega suggests.
Other ways of off-setting costs is to rent out the property and make sure it is tax efficient.