The idea of buying an overseas property, whether for investment or a holiday home, is appealing to more and more people not only in the UK but around the world. We only need to look at areas such as the Spanish coast to see the number of UK expats who have invested in Spanish property with the intention of spending their later years in the sun. However, those who assume they are buying like-for-like with regards to the process, cost and long-term prospects may need to think again.
If you are buying a property overseas it is likely that the purchase contract will be in the local language with a translation into English. Do not automatically assume that the translation between the two languages is perfect and ensure that you get your solicitor to look over both contracts. If you miss any anomalies as a consequence of the translation this could cause major problems further down the line. Protect yourself, take local advice and do not sign anything until you are 100% sure.
When buying a property overseas the vendor may well recommend certain parties to act on your behalf to speed up completion of the transaction. This is perhaps more likely to occur where you are buying a new build or properties still in development. Ask yourself this question, if these parties are being recommended by the vendor where will their loyalties lie? Ensure that any parties acting on your behalf have no connection to the vendor and where possible obtain recommendations from friends, family and business associates.
Valuing the property
Valuing any property does have scope for different opinions but in reality there should not be an awful lot of difference between “arm’s-length valuations”. If you are buying a property in the UK you would ask your own representatives to provide a value prior to completing the transaction. So, why should this be any different when you are buying overseas? There may be added costs in appointing representatives to give a third party valuation of the property but they may point out problems, potential issues and whether indeed the property has any connected debts or guarantees. Cutting corners can be very expensive!
Many people make the simple mistake of assuming a like-for-like taxation environment when acquiring property overseas. Issues such as inheritance tax, capital gains tax and even mortgage relief can and will vary from country to country and sometimes from region to region. Do not automatically assume you are trading in a like-for-like environment and ensure that you take professional financial advice. This is obviously another cost but it is advice which can be worth its weight in gold.
When agreeing to acquire a property you will need to pay a deposit prior to payment in full which is often financed via a mortgage. Traditionally the main exchange rates have tended to remain relatively stable but if you look back at the Brexit vote in 2016 we saw a near 20% reduction in the pound in a very short space of time. When a transaction has been agreed where possible you should secure the exchange rate at the time so there are no issues further down the line. Taking out a mortgage in your home currency, paying mortgage instalments in your home currency and exchanging into a different currency to complete the transaction would be the preferred route. This ensures there is no exchange rate exposure on future mortgage instalments and you know where you stand from day one.