HOW TO BUY OVERSEAS PROPERTY SAFELY - 2018 13TH EDITION - Cyprus Property News
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THE INDUSTRY VOICE. THE INDUSTRY BODY. THE INDUSTRY STANDARD.
H OW TO BU Y O VERS EAS
P R OP ER T Y S AF ELY
201 8
1 3 T H E D I T I O N
AIPP BUYERS GUIDE 2018
BUY RIGHT,
OWN WELL
ver heard the saying “buy in haste, repent at leisure?”
E Buying a foreign property can lead to a wonderful
lifestyle addition and a great investment. But, as with
all large capital purchases, caution should be exercised,
advice taken and precautionary steps heeded. That is why AIPP
publishes this guide - ‘How to Buy Overseas Property Safely’ - now in its
13th edition - and available completely free of charge.
AIPP is a not-for-profit organisation set up in 2006 to guide and
assist British buyers of a foreign property – all of our services are
entirely free to you, the buyer. We focus on two key areas; 1. Consumer
Education & Protection and 2. Trade Best Practice (appropriate aspects Peter Robinson, CEO, AIPP London
of our work are endorsed by UK National Trading Standards - Estate
Agency Team).
We are funded by our 350+ corporate members from 31 countries
around the world; AIPP members want you to have the best experience
possible in pursuing your property dreams. Our members comprise
agents, property developers, lawyers, banks, currency specialists,
The AIPP does not
media and other trade professionals. Each member abides by our code sell international
of conduct and offers recourse through The Property Ombudsman,
should this be required. property, but we do
A foreign property purchase usually touches upon significant
financial, tax, legal, estate planning and other ownership-related our best to see it is
matters. If you are unsure how to best navigate them please do
contact an independent financial adviser. Make sure you use a sold properly.
truly independent lawyer to look after your interests. Ask non-AIPP
companies to provide references, take them up and, if buying off-plan,
make sure you are clear about how the development is being financed.
You can find out more about the AIPP on page 18 and on our website
- www.aipp.org.uk - which includes a two minute video on what we do,
free, for buyers. Do take the opportunity to research and connect with
our members in your country of choice. Members are listed in the back
of this guide with an up-to-date listing of all current members to be
found on our homepage.
There are many, many successful and happy tales of buyers enjoying
their foreign property purchase. Take a few sensible precautions, do
your homework and join their happy ranks. Read on and find out how,
with our compliments. | AIPP
© Copyright AIPP 1
AIPP BUYERS GUIDE 2018
TODAY IS NOT
LIKE YESTERDAY
(THE LAST FOREIGN PROPERTY BOOM ENDED 10 YEARS AGO)
round 800,000 finance or customer services,
A overseas properties
were bought by
many with very unhealthy
relationships with banks, agents To support British owners,
British people as
second homes before the global
& lawyers.
Some foreign banks, as AIPP has set up a sister
financial crisis (GFC) started in
2008. A peak of around 70,000
principle funders, became
unwitting owners of many failed
organisation; the Alliance of
British buyers were active in the property developments and have, International Property Owners
foreign property market in 2007. over the last 10 years, been
Many of those buyers continue to completing and selling them off
own these properties for holiday, at discounted prices. But most
investment or retirement use, but of this stock has now been sold,
some do not. Lack of research, with that remaining perhaps of British owners of a property in
poor industry practices and rash little interest to foreign buyers the EU is still far from clear (at
decision making led a significant looking for a well located holiday time of writing). To support British
minority of foreign property buyers home. Plenty of property was built owners, AIPP has set up a sister
into trouble. in highly questionable locations organisation; the Alliance of
Property prices have stabilised as cheap development, finance International Property Owners.
since the GFC and are now and speculative capital growth Both owners & buyers should visit
heading upwards in many drove the markets. Some banks www.aipo.org.uk to register for our
destination markets now with an have retained choice land sites free newsletters, help and advice.
estimated 20,000 Brits having acquired from failed businesses This is a long-term initiative
bought a foreign property in and now, with perhaps 10 years going beyond just BREXIT related
2017. But what these new buyers hard-won property experience, matters, extending into all the
are witnessing is a landscape are developing sites themselves. various aspects arising in foreign
of foreign property opportunity Such developments from banks property ownership. As such,
transformed during the past ten might offer the prospect of better the Alliance will support British-
recessionary years. due diligence and an attached resident owners of a foreign
Gone are the large Brit-owned (conditional) buyer mortgage property in 4 keys areas:
foreign-based estate agents offer.
heavily marketing themselves As the market continues to 1. Knowledge & Support
aggressively into, particularly, recover, there will be renewed (including free legal advice)
the UK. The agents who are left focus on new-build property, 2. Representation to authority
have proud reputations to protect, driven by the higher and attractive (National & Supranational
having traded successfully in margins for sales agents. Governments)
showing great customer care Consideration of whether to buy 3. Offers & Discounts
through the lean years. Gone new-build or resale is covered in (to lower the cost of using
too are most of the highly page 9 of this guide. your property)
speculative property developers This section would not be 4. Owners Community Hub
with little or no experience in complete without a mention
land, construction, development of BREXIT. How this will affect | AIPP
2
AIPP BUYERS GUIDE 2018
GETTING
STARTED
o where do you begin? Ok, so you think you know which
TOP TIPS...
S country you want to buy your property in - most people
will have visited a country and region many times before
deciding to buy there. Many people will be buying with
a husband / wife / partner, so it is vital you two are both aligned. You may not intend to rent your property
Our top tips to ensure you are both ‘on the same page’? out but circumstances can change - a
Each take a blank sheet of paper and a pen and sit in separate rooms. property you personally fall in love with
Then answer the following questions and compare results. but is out of the main tourist areas can be
Both happy? Aligned? No? Then you need to talk… difficult to rent / manage should you later
wish to do so.
Questions to ask yourself:
What are you PRIMARILY buying this property for: The likely rental value that you
Holiday home may achieve should be considered
More of a financial investment – to be mainly rented out before purchase - also who you might
To retire to now rent through. Have a look at
To retire to later with some mixed holiday / rental use www.Holidaylettings.co.uk to get an
idea of the market. A local agent has
What do you each see yourselves doing in the region, some advantages although income will be
facilitated by your property? in the local currency (not Sterling) and
100% time together relaxing the quality of service can be highly
Boys golf trips (how often..?) variable - in some instances, fraudulent
Girls weekends away (how often..?) accounting of what the local agent says
they have let the property for in value and
How often do you think you will visit your property in the first year, time being less than they have realised.
3rd year, 5th year, 10 years+?
One way to beat both currency and
When your property is not occupied by your friends and family fraud issues is to contract with a UK
will you rent it out? holiday company who could offer you a
fixed contract (regardless of number of
How long will you rent it for and for how much? weeks used) in Sterling. Have a look at
the likes of Villa Plus and James Villas etc
What NET rental income must your property realise after cost of for typical market values and to perhaps
servicing, agent fees, taxes, running costs and other deductions? make an enquiry as to whether they are
(Note. You know you always underestimate how much money looking to add properties to their portfolio
you will spend whilst on holiday? yep, owning and running a foreign in the area you are interested in buying.
property is pretty much like that too. Put a comprehensive budget
together, pronto!) There are no right or wrong answers - just the
answers that give you both clarity of purpose and direction as to
what is the right property that meets your own individual needs.
| AIPP
3
AIPP BUYERS GUIDE 2018
WHERE
IN THE WORLD
ost people who buy
M a property abroad
will have a pretty
good idea of where
they want to buy, whether a
specific country, region, or even
resort. Holiday-home ownership
is often referred to as the “final
stage of tourism” and indeed
the story behind a good many
property purchases will involve
owners being drawn back to the
same place year after year and
then finally deciding to commit
more fully by buying their own
home there.
But maybe you don’t know
where to buy for sure? It’s all properties are so affordable locations such as Turkey, is often high on many people’s
too easy to get bamboozled with there currently. In 2014 Spain Greece, Italy or Croatia. wish-list but generally require
tempting landscapes, persuasive began to emerge from its worst With property prices still well deeper pockets, as are other
arguments and alluring prices but ever property crash so that whilst down from their peak in many bucket-list locations such as
usually the best place to start is prices are still well down on their Eurozone countries outside the Indian Ocean, South Africa’s
asking yourself why you want to 2006/07 peak, investors have Spain, affordability – is good Western Cape or the Maldives.
buy abroad. the confidence of putting their although Sterling value to the Your money will go much
Knowing what you want your money into a market capable Euro has suffered. But if you have further in Thailand, however
property to do for you is explored of recovery. always hankered after a home in affordability must be weighed
more fully on page 7 but if we So, to summarise: Spain’s Portugal, France, Italy, Greece or against ownership complications
take the most popular current an established, relatively familiar Cyprus, then now is arguably the for foreign buyers and the varied
locations for residential property market for the British with buoyant best time in over a decade to buy risks of buying in an emerging
hunters (we are not talking about tourism promising reasonable it – if you have cash. Note that market. Since the global downturn
commercial property investment returns for property hunters lending options have narrowed the horizons of British buyers have
in this guide), it’s a useful seeking to cover their running although a 75% LTV is readily certainly narrowed and focused
snapshot. costs; with a decent chance of achievable. on the “safe” and close to home.
some capital growth too. Yes, there’s still an interest in
Why Spain? Climate factor Eastern Europe, the Balkans and
Spain is the stand-out favourite, …or why not? For those seeking year-round North Africa for the intrepid, but
according to multiple sources, Of course the flipside of the coin sun, Florida remains the popular “new” destinations are regarded
because it ticks so many boxes. is that some of Spain’s coastal choice, again with fast-growing with an entirely healthy dose
We are not only talking about the areas might already offer too tourism and property prices down of caution. | AIPP
perennial issues of accessibility, many British, or indeed foreign, from their 2006 peak – though
climate, beaches and quality owners for some people’s rising again in many hotspots
of amenities that have kept its liking, so for a more “authentic” such as Orlando and Miami.
tourism numbers swelling year experience of owning abroad The sugar-sand beaches and
after year, but the fact that they might head to less familiar laid-back vibe of the Caribbean
4
AIPP BUYERS GUIDE 2018
THE KEY PLAYERS
WHO DOES WHAT?
t is often said that straightforward hand-holding
I the biggest mistake role, showing you properties A
G
British buyers can and then being the middleman
E
make abroad is between buyer and seller on a D
N
assuming that things work the purchase. When you buy abroad E
T
same as they do back home. But agents will usually have to do a V
N
E
there’s truth in this, and one of lot more legwork: picking you up O
L
the biggest pieces of advice one at the airport, driving you around T
O
can give is to somehow find the areas for comparison, fielding A
P
right person to hold your hand questions about amenities R
E D
through an alien buying process. and transport routes as well as Y
R A E
So whilst all countries have frequently translating everything G V
their own quirks and foibles, let’s you encounter. E E
kick off with the key person in So when choosing an agent N L
your search: the agent. you are going to need to know T O
whether the person is going to be P N
E
Agents capable, and prepared, to do all O
R T
At the risk of stating the blindingly of the above – if you require it.
A
obvious, agents exist to sell It’s a sensible idea that you meet
R
property for a client – whether a prospective agent face to face
Y
a private vendor, a particular and clarify their knowledge and
complex or a developer. They role from the word go.
might market this property in information, good and bad
the locality, or they might travel How to find an agent? (are they members of AIPP?
around promoting it at trade fairs Do your own research first and Are they mentioned positively in
and exhibitions, or they could be online is where you might start buyer forums?)
based in one of the key markets looking for an agent. Going to a As in the UK, agents are not
for their project, be it the UK, property exhibition and meeting always regulated or accredited in
China or Sweden. people face to face is a great any way – this differs hugely from
In return they of course way of finding an agent too, country to country – and quality is
receive a commission, and that although not all agents attend also widely divergent. If they are
commission will vary on the these. Either way, look on the big a member of the AIPP you can at
country and whether the property overseas property portals such as least have the reassurance that
is resale or new-build. rightmove.com, zoopla.co.uk or they are bound by a professional
Commissions tend to be aplaceinthesun.com and see who code of conduct and disciplinary
higher abroad – and do check is selling a good choice of the process with some recourse to
your liability at the outset of your type of property you are seeking. compensation if things go wrong
search as it’s not always the A professional and user-friendly When you meet your
seller who pays it all – because website with all sorts of extra prospective agent, don’t be afraid
the agent’s role is usually more useful advice is a good starting to test their local knowledge.
comprehensive than that of one point for finding a professional What is your gut reaction, do
in the UK. and user-friendly agent. Equally, you feel that this agent will
In the UK, estate agents Googling an agent’s name can best represent your particular
perform a relatively throw up all sorts of useful interests? If you don’t get a
5
AIPP BUYERS GUIDE 2018
THE KEY PLAYERS
WHO DOES WHAT?... CONT.
sense that they are willing to financing the project? Are the training who is licensed by the
spend time getting to know you buyer’s stage payments secured government to carry out legal
and are properly listening to your by bank guarantees? affairs such as witnessing the
requirements, look elsewhere. Look at their track record. signing of property purchase
A good agent should carry out Have they completed previous documents and wills. Whether
their own due diligence before projects successfully? Can you go French notai, Spanish notarios
agreeing to sell a property – to and look at the quality? Are the or Italian notai their job is to
save wasting everyone’s time. current owners happy two years see that the property purchase
The bad ones will leave the on? As with agents, ask them to process is carried out correctly –
buyer (or their solicitor) to find prove everything. Don’t just take and ensure that the related taxes
out whether the property is legal their word for occupancy rates are paid.
or legitimately owned. He or or monthly homeowner fees or Notary fees are fixed and
she should also offer advice on the quality of the development’s payable by you, the client and
elements related to the buying management committee, ask to although not generally too
process such as obtaining a tax see the relevant documents. If onerous, should be factored into
number, opening a bank account they have a contract with a hotel buying costs. Impartial overseers,
or introducing the buyer to operator such as Mark Warner, notaries may give you useful legal
mortgage advisors. ask to see it. advice but they should not be
But beware of two things that In the same vein, treat confused with lawyers, because
agents are not. They are not there so-called ‘rental guarantees’ they are not there to represent
to act as your lawyer – you’ll need with a healthy dose of scepticism. you and you only. | AIPP
your own independent lawyer It is important to realise that in
to represent your interests only; order for the rental guarantee to
and they are not there to take be covered (assuming that it is),
responsibility if things go wrong. the developer may have marked
Remember they are always - and up the property to begin with -
just - the middleman. only to then pay you back your
own money as ‘rental’. Genuine
Direct from the rental guarantees are only as
developer good as the organisation offering
If you are buying off-plan or them so find out what happens if
something in the process of they are not realised –
being constructed, you may buy before you buy.
Once you are beginning the
Commissions tend to be
direct from a developer. The
developer owns the land, obtains buying process – of a new-build higher abroad because
the relevant building licenses and or resale property – you may deal
planning permission and then with a notaire as well as your the agent’s role is usually
builds the project.
When buying a new property,
lawyer (see page 14).
more comprehensive than
buyers (or their lawyers) should
question everything the developer
New for UK buyers:
the notary
that of one in the UK
claims. Has the developer got the A notary or notary public is
building licences? How are they a public official with legal
6
AIPP BUYERS GUIDE 2018
WHAT DO YOU WANT YOUR
FOREIGN PROPERTY
TO DO FOR YOU?
ost people will buy a anticipated but not exclusively reward for many years of hard
M property for one of
two main reasons:
to enjoy a lifestyle in
relied upon – what happens if
many of the apartments in the
block you bought into are owned
work. Many people enjoy this
change and join local as well as
expat communities in the sun.
a given area or just as a financial by investors and they come to But consideration should also be
investment with minimal / no market around the same time? given to later changes to come in
usage. Of course, no-one buys You may be surprised how life with, perhaps, access to and
a property to lose money, so all often this happens as investors around the property important
property is a mechanism by which respond to changes in the local should mobility become a factor.
capital is tied up that will, it is market and macro-economic Access to medical care and
hoped, at least hold its value and financial picture. perhaps a care home for a
perhaps appreciate. That said, research by partner, whilst not in the mind
Delve a little deeper and the Rightmove Overseas points to of most 50-somethings, should
picture becomes a little more the majority of UK buyers in be a key consideration as we are
complex; perhaps the buyer 2017 buying a foreign property living longer, but perhaps also
intends to retire /part retire to to meet a long-held desire to getting mentally and physically
a property in the sun but first own a holiday home into frailer because of it. With higher
buys it for family holidays also to retirement usage. sales and purchase costs than
let-out as a means for paying for A holiday home is, perhaps, buyers are used to in the UK,
the investment over a planned 20 a big treat to yourself and a it could be very expensive and
year mortgage period. significant capital outlay. To be unsettling to move property again
The last foreign property boom added to the cost of the property after retirement. Finding a buyer
was caused, in part, by property is the cost of purchase (perhaps for your property (if in a typically
speculators not investors – around 12% in Spain) and expat or touristic area), will also
defined as investors with a very running costs. Prudent budgeting follow the pattern of demand –
short purchase to sale period, is therefore vital if you are to try and sell in a weak market
often just a few months. This enjoy your holiday home without and your property could take
led to a glut of properties being financial worry. It may also mean many months or years at the
built and sold without enough you wish to let your property price you want / can afford
‘end-users’ or ‘lifestyle’ buyers out to help pay for its upkeep. to sell at. | AIPP
coming into the market to acquire This may then influence your
and live in them. So if you are choice of location of holiday
buying for investment you should home – perhaps less rural idyll
be clear on your exit plan and towards walking distance to
be aware of the market-inflating shops, restaurants and other
practices of speculators – do you tourist amenities?
consider yourself a speculator? Purchasing a property for
Buying for investment is a retirement and emigration
different scenario altogether often go hand-in-hand. It is an
with careful consideration given appealing prospect to sell a
to the net yield that a property higher-valued UK property and
will give over a defined period. to get ‘more’ for your money
If you buy at the right price then by buying abroad. This is often
some capital growth may be the intended ‘last move’ and a
7
AIPP BUYERS GUIDE 2018
INSPECTION
TRIPS
here property trip is the best route for them.
WHEN DO PEOPLE BUY?*
W markets are rising,
inspection trips have
returned. They are
The key, as always, is to
ensuring your expectations tally
with those of the agent who is
*Active buyers
certainly not carried out in the behind the exercise. What will be SPAIN PORTUGAL
sort of volumes – or in the same paid for exactly (flights are often
25% 15%
fashion – as they were at the part-covered or accommodation
height of the property boom but offered at a discount), what does
they remain a powerful sales tool the agent expect in return? Can
and an “easy” way for buyers to you meet with other agents?
go home-hunting. If you know an area reasonably LESS THAN A YEAR LESS THAN A YEAR
Now buyers in the market well, going under your own steam
26% 26%
are far fewer, but they are a bit and arranging your appointments
more savvy about inspection with agents gives you more
trips, which came to symbolise freedom, yet trips organised by
the “hard sell” culture found an agent can be a good way of
IN 1 YEAR IN 1 YEAR
(particularly) on the Spanish identifying properties that match
25% 24%
Costas during the boom years. your requirements if you don’t
But the old-style “freebie trips” know the area and don’t have
have in the main disappeared time to explore fully.
and now agents can’t afford to Inspection trips don’t tend to
spend money on trips that are force-feed properties from dawn IN 2 YEARS IN 2 YEARS
a waste of time so there’s a to dusk as they once infamously
10% 7%
certain amount of pre-selection did, but “new generation” trips
on both sides. will give you the chance to see
Not everyone feels comfortable the highlights of an area – after
with the implied obligation that all in many cases the agent is
comes with being on a paid-for selling himself first, then the
IN 3 YEARS IN 3 YEARS
trip, whether agent or property region, then finally the property.
2% 2%
hunter, so some major agents It’s up to you to make the
treat them as strictly business most of any trip, you don’t want
trips, or in one case, rebranded to be getting on the flight home
them as “lifestyle visits”. thinking of lots of things you IN 4 YEARS IN 4 YEARS
There will be a greater element wished you’d asked. Do your
12% 26%
of vetting to ascertain how research before the trip, prepare
serious buyers are and whether questions to take with you, and
they have the finance in place make the most of viewings, taking
to proceed. photos to jog your memory back
Buyers themselves need to home. It won’t be so easy to nip IN 5 YEARS IN 5 YEARS
do their research first – into the back and double-check the view
area and the agent (is there from the patio or the amount of Source: Rightmove Overseas
anything on those online forums?) storage space. | AIPP
– and work out if an inspection
8
AIPP BUYERS GUIDE 2018
RESALE
OR NEW-BUILD?
or some people, out your home professionally, a Incidentally, Italians tend to
F only brand spanking
new will do, and this
applies to buying
brand-new new-build with all the
latest integrated technology is
going to appeal to a large pool of
love new-builds whilst overseas
buyers in Italy lap up those
wonderful historic homes with
a home as much as a car, sofa potential guests, and also offer a original terracotta tiles, oak
or suit. more practical, hassle-free option beams and even frescoes.
There’s of course a certain for the hands-off landlord. For many of these buyers, a
appeal of taking possession of Although you may be liable “character-less” new-build
something that has never been to a VAT type tax on new-builds, can never compete with a piece
used and shaped by someone you may be able to reclaim this of history, and here is the main
else, as well as a sense of the if you rent it out professionally, appeal of a resale property –
pristine. When buying a property plus you could expect very or at least a period one.
the pristine has hefty financial little extra outlay on top of Decades of wear and tear
advantages, from a 10-year build the purchase price to eat into can be part of a property’s
guarantee (in many cases), the your rental income. appeal – think of ancient stone
prospect of a year or two free Another advantage of buying floors polished by generations
of repairs (ideally!) and perhaps pre-construction (off-plan) or of owners - and a property’s
lower insurance costs (in Florida). during the build process is that uniqueness can be appealing to
There’s also the advantage you often get to decide the buyers and renters.
that your home might offer the finishes or even layout of your But do make sure you have
latest technology and fashionable new home. Having selected the a survey undertaken before you
finishes, as well as a higher build- exact location of the plot (if part of buy a resale property – although
quality than something built at a complex) there is a far greater not necessarily customary in
the height of a property boom a element of choice available in countries like Spain and France
decade ago. This is a factor behind shaping the final product you – because the older a property,
the current trend towards new- want. The plot you choose will the greater scope for hidden
build in the overseas industry – in be significant when you come to problems. With resales, “what
the Spanish and Florida markets sell – homes on corner plots may you see is what you get” does not
in particular – where buyers are sell faster than others mid-terrace; always apply – although you can
rejecting outdated or outmoded whilst those backing onto a road see how the property works as a
properties in favour of the “new might take longer. home and its surroundings, which
generation” new-builds that have So far so wonderful, but you can’t do when buying off-plan
begun to be constructed after some words of caution too: or mid-construction.
a hiatus of several years in the make sure you do due diligence Do also check whether a
construction industries. on the builder and have a firm property complies with modern
A lot of lessons have been understanding of what costs building regulations and if
learnt in the industry since the you might be liable for – the any alterations or extensions
global downturn ended several buyer of a new-build might have come with the correct planning
years of frenzied property extra costs that the resale buyer permissions. Get your lawyer
investment and developers doesn’t. For example, in Italy to check and avoid heartache
have realised they are having to your kitchen might not be later on. | AIPP
respond to buyers that are more included. Also, buyers anywhere
discerning and demanding. should be aware of expensive
Certainly if you expect to rent furniture packages.
9AIPP BUYERS GUIDE 2018
BUDGETING
s with buying a agent in Andalucia suggests to be covered by local taxes.
A home in the UK,
the costs of property
ownership run far
that you budget “10.5 to 14 per
cent” of the purchase price for
purchasing a resale property, with
In Spain there’s an annual
property tax called IBI whilst in
France there are two types of
beyond the price on the sales an additional 2 to 4 per cent on tax: Taxe d’Habitation and Taxe
contract. The key to managing top if you are having a Spanish Foncière and in Italy it’s even more
your finances successfully mortgage. Note that buying costs complicated – a three-part service
is knowing what you can vary across the 17 different tax, the IUC, introduced in 2014
expect to pay. regions of Spain. and not universally understood!
Don’t make the mistake of You also need to understand
assuming that either or both of Running costs the difference between being
these will be lower than in the On top of the cost of any resident in a country and being
UK – buying costs can be much mortgage on a property, there tax-resident there. This has
higher in different countries and will also be ongoing taxes and implications for inheritance tax
second homes tend to be taxed running costs on second homes. (IHT). If you rent out your property,
more highly too. Ongoing costs The level of these is important you’ll also need to pay income
may include high upkeep costs to ascertain early on, as it might tax on rental income locally.
involving management fees and help decide what type of property In fact, it can be worthwhile
also climatic wear and tear. you buy (new or old? standalone taking expert advice – from a local
or part of a complex?) as well as lawyer or accountant – or in Spain,
Buying costs where you buy it. a Gestor – once a year to ensure
Buying or purchase costs involve a Also, these monthly expenses you pay the right tax - at the
combination of agent commission will also eat out of any rental right time.
costs (varying by country and income you make from your
sometimes region); transfer property, or indeed force you Insurance
tax or stamp duty, notary/land to think about renting it out to Holiday homes are often left
registry costs, legal fees plus any “wash its face” (cover its costs). unoccupied for long periods, or
mortgage arrangement fees. If you don’t want the hassle of they are rented out to third parties
If you’re buying new-build there’s doing this, then make sure you so specialist insurance needs to
the VAT – although this may be can afford to keep the property be factored in.
redeemable if you opt to rent without letting it. If your home is in an earthquake
out your property professionally zone, hurricane belt or frontline
(French leaseback and tourism There’s always tax beach location then such costs
residences in Austria, You also need to consider the may be higher than usual.
for example). yearly taxation you might have Insurance costs may well
Purchase costs can add up to to pay as a non-resident (or be covered by community or
over 10 per cent of the sales price second home) owner as well as development fees, but check
of a property, depending where community fees, homeowner this - communal parts of the
you buy, so you really need to association fees (in the US), development may be covered
factor this into your budget when insurance and types of council but not your specific property
you make an offer on a property. tax. If you own a home in a or contents. | AIPP
Ask your agent to advise you on community, there will be costs
this before you start your search. for street lighting and rubbish
In Spain, for example, a leading clearance etc that will need
10AIPP BUYERS GUIDE 2018
MORTGAGES
ood buying So, if you’re going to be paying
HOW WILL PEOPLE BUY?
G conditions are
drawing British
with a UK salary, your mortgage
should be in Sterling, but if you
59%
buyers back into plan to rent out your property in
the overseas property market France, you’d be better off with a
with prices lower than they have Euro mortgage.
been for nearly a decade in some Shop around and consider
locations. using a mortgage broker – as CASH
5%
That said, the mortgage well as a currency broker, to
marketplace has changed beyond take advantage of exchange rate
recognition so take some general fluctuations when you transfer
advice to get a broad overview of your cash abroad for the deposit;
what you can borrow and where. and ongoing monthly payments. As EQUITY RELEASE
25%
A good place to start is a mentioned above, lending varies
specialist overseas mortgage considerably between countries.
broker and a LTV of 75% should We start with France, the
be achievable - subject to status. anomaly, currently offering some
Do your research and consult of the best mortgage deals of all MORTGAGE
2%
lenders before you start seriously time and the greatest range of
property hunting. You will options for overseas buyers.
generally need a healthy deposit Beware, though, that the cost
and the ability to provide a sound of changing mortgage provider
financial profile. You will probably is much higher in France than PENSIONS
9%
need to show proof of income in the UK (around 2.5 per cent
and outgoings so the debt to of the mortgage value), hence
income ratio – or affordability – most French people don’t tend to
can be scrutinized, so get your switch lenders. Also note that old,
paperwork ready in advance. rural properties are seen as more DON’T KNOW
Having your financial affairs of a liability by lenders.
in order – and even an Approval In contrast, the choice in Spain Source: Rightmove Overseas
in Principle (AIP) - will also show is much reduced with repayment
agents and vendors that you are loans the norm. For bank
a serious buyer and can move properties of course the situation
fast to complete a sale, and even is different as a bank may offer
use it as a negotiating tool. you 100 per cent LTV to get a
As a general rule, when property off its books.
choosing your mortgage always In Italy buyers are advised
borrow in the same currency as they might get better rates
the source of funds you plan to with a regional rather than an
use to cover the repayments. international bank. | AIPP
11AIPP BUYERS GUIDE 2018
CURRENCY
roperty hunters Currency brokers can buy your You will typically be given online
P abroad tend to
be much more
educated than they
currency at the exact time that
rates are best, and if you are
not restricted by time with your
account access from which you
are able to transfer Sterling
to your broker and they do the
were a decade ago and, apart purchase, “stop-loss orders” and rest - such as making regular
from appreciating the need to “limit orders” allow you to buy payments abroad.
take independent legal advice, currency when your preferred Once you’ve purchased the
many have learnt to use a foreign exchange rate is available. property, you will almost certainly
exchange (or FX) company. Also in common use now need to make regular payments
Whilst there are so many are “forward contracts” which overseas from the UK - to meet
variables when buying an effectively protect your buying mortgage repayments, and pay
overseas home, one major power from currency fluctuations local bills, taxes or management
certainty is that you will need by letting you fix an exchange costs. If you are retiring abroad
to exchange your pounds into rate for a future transaction. This you’ll need to have your pension
another currency and transfer makes financial planning easier. paid monthly into a foreign bank
these funds abroad. Plus, in You can fix today’s exchange account. | AIPP
this global age, it is hard not rates for up to two years with
to appreciate the relevance a Forward Contract, and only
of exchange rates, with some lodge 10 per cent of the total you
dramatic swings to and fro within want to convert initially. With this
the last couple of years. popular type of contract you can
But if choosing when to buy either fix the date you wish to take
to capitalise on a particular delivery of your currency, or have
currency’s strength or weakness the option of taking delivery at any
involves a certain amount of point up until the agreed date.
guess-work, using a FX broker in You can fix the amount of
a currency transfer can without pounds you send abroad on
doubt save you a certain sum of a regular basis, for example
money over using a bank because monthly, which means the amount
they very often offer better rates. of local currency you receive in
These days overseas property your foreign bank account will
fairs and exhibitions are full of FX fluctuate with the exchange rate;
companies and because - broadly or you can fix the amount of local
– they all offer the same services, currency, for example euros,
it’s a competitive marketplace. that is paid into your overseas
account, meaning the amount of
So how does it work? pounds being debited from your
When you are planning your UK account will fluctuate with the
overseas purchase, it’s good to exchange rate.
have an FX broker lined up in You can typically save up to
advance. Brokers will allocate you four per cent over using a bank
a personal account manager, who – so £4,000 on a £100,000
will monitor the currency markets apartment; £8,000 on a
and keep you updated. £200,000 villa, for example.
12AIPP BUYERS GUIDE 2018
PLANNING
FOR THE FUTURE
n other sections either. In which, or both, will you in which your immovable assets
I of this guide so far
we have covered
the need to budget
be tax-resident? You may need
to file tax returns – and pay taxes
- in both countries. Make sure
(property) are situated, or where
you are domiciled. So do take
expert advice even before you
when planning your move abroad, you understand domicile – and sign the sales contract and
when purchasing a property and the definition of domicile differs decide the most effective way
for running your home. between jurisdictions – because of purchasing (as far as who
But, as always, there is a need the fate of your movable assets is on the deeds), and whether
to plan ahead and anticipate (stocks and shares etc) when you you buy as an individual or as a
changes of circumstance in the die may be affected – see below. company. Such advice must come
future. In fact, a large amount from someone with expertise
of people in their fifties certainly Inheritance and in the country to which you are
seem to be doing this already, succession planning considering because such matters
with agents reporting that UK Even if you have no thoughts of are fiendishly complicated –
pension reforms have played their retirement when you first buy and also about to change…
role in kick-starting the market in a home abroad, bear in mind
Spain especially. that it might make sense to put New EU legislation
From March 2014 the over-55s your children on the title deeds on inheritance:
have gained greater access to to save on transfer taxes and/ August 2015
their pension pots with the ability or inheritance taxes. Whether On 17th August 2015 EU
to withdraw a lump sum of up to you do or not, bear in mind that legislation on “forced heirship”
£30,000, (couples are now taking a carefully drafted will pays changed. According to Regulation
cash and investing it in a property dividends – Spain reduces number 650/2012, any person
ready for the time when they inheritance tax (IHT) liability with owning property in a participating
are free to spend longer periods the addition of children to the will EU state (who has taken
in the sun (find out more on as well as ensuring your estate appropriate action before their
pension reform at goes to exactly those you wish death), can choose between
www.gov.uk/government/news/ it to. the law of the country of their
pension-reforms.) Because don’t assume that if habitual residence, or the law
Even if you don’t do this, you you buy a property abroad you can of their nationality to govern the
will need to decide how you draw hand it on to whoever you choose. devolution of their EU estate. So
down your pension [see page 15] You may have heard of France’s with some forward planning – ie
and what type of resident you will historic forced heirship rules amending your will - you will have
become in the country where your (where the state dictates how your more control over the fate of your
home(s) are located. estate is divided up between your property. Now that is a positive bit
children, siblings and your parents of legislation. | AIPP
Tax residency rather than your spouse), well
and domicile each country currently has their
If you intend to gradually semi- own rules governing who should
retire to your overseas holiday benefit when someone dies – and
home, then beware of falling how much tax is paid.
between two countries and not Succession law – who gets
being properly registered as a what when you die – is governed
resident (or habitually resident) of by the jurisdiction of the country
13AIPP BUYERS GUIDE 2018
WHY YOU SHOULD
ALWAYS USE A LAWYER
f there is just one why should we not use one in a
I thing that you take
away and follow up
strange market abroad?
Don’t fail to use one because
on it’s this; please
use an independent lawyer on
you want to save money or
because you can’t find one.
You can always use the AIPP
your overseas home purchase. Typically, fees for an overseas FREE legal service to get some
A multitude of problems can lawyer are 1-1.5 per cent of the
usually be avoided by doing this purchase price, with a minimum initial advice - a service from
one thing, even though it might
cost a little extra, the expense
fee so factor this into your
purchase budget from the start. our Legal Working Group (LWG).
might provide priceless peace of
mind – and spare you far greater
Get someone lined up early on
and make sure they can translate
See our website for details
financial losses later. documents for you as well and to apply.
Some agents or developers may as carrying out all the
express surprise at your decision relevant checks.
to use a lawyer - it may be custom So how do you find someone
for locals not to do so. The seller with no conflicting interests in
of the property may recommend a the transaction who will work
lawyer to you. But buyer beware, is exclusively for you? In comparison, the role of a
this lawyer going to be completely Recommendation from another lawyer is the same as in the UK
impartial? buyer is one route, although a in that they are acting in your
A truly independent lawyer, who good starting point is the AIPP, interests so will do all necessary
will act to protect your interests, because we have law firms as due diligence for you, ensuring
is one that is not working in members (aipp.org.uk). your purchase contract achieves
collaboration with the agent or But don’t assume that seniority – everything you expect and have
developer. That is not to say such as being in a country’s Bar agreed on.
that some lawyers suggested Association – equals pure ethics. Never sign a sales contract
by respectable companies will Another route is through the or mortgage agreement without
not be truly independent, but British consulates overseas, having it checked by your lawyer.
corruption does still exist in who usually keep a list of lawyers Their remit includes searches
various countries, and you should they recommend. on the property, the land it stands
be aware of potential conflicts Don’t confuse the role of notary on, planning permissions, and
of interest. for that of a personal lawyer: whether it carries any debts or
As a buyer in a foreign country in many European countries encumbrances.
(who may not even speak the notaries are legal representatives They will act as facilitator
language), you are, after all, highly of the state whose job is to between the different parties
vulnerable to exploitation because oversee and rubber-stamp involved in the transaction, and
you probably won’t be familiar property transactions. also advise you on related issues
with the property-buying process. They will draw up the deeds, such as finance, taxation and
In the UK we routinely use a but their impartial position means inheritance law. | AIPP
lawyer when buying or selling a it is not their responsibility to
home - we don’t have a choice indicate whether the deeds are
because the conveyancing in favour of either the vendor or
process involves solicitors – so the buyer.
14AIPP BUYERS GUIDE 2018
RELOCATION:
THE PRACTICALITIES
f you are moving (a QROPS) but what are the pros passport is up to date. Always
I abroad full-time,
rather than just
buying a holiday
and cons? Weigh up the options
and check your entitlement to a
state pension at retirement age:
keep a copy of your passport
somewhere safe. You will also
need to start notifying insurance
home, then there are some get a pension forecast at www. companies, banks, GPs, dentists
practical things you need to direct.gov.uk. Also, always allow etc of your move. Any pets?
consider. On many of these you some cash for contingencies Moving your pet can be the most
will need to plan ahead, especially and consult a regulated financial complicated and/or expensive
if you have children who will advisor if you have any queries. part of your move abroad!
need to start a new school at the
beginning of an academic year. Welfare rights? Benefits Driving: Will you sell your
may be affected by your move car before you leave or take it
Schools: Application deadlines abroad so find out what you with you? Compare costs and
for international schools tend will be entitled to. If you are legalities. In some countries
to be in January for the autumn moving within the EU you will buying a car can be prohibitively
intake, so schedule exploratory have rights, plus even outside expensive due to import duties
visits the autumn before. With a (in countries such as Canada (Turkey, for example). Can you
rising demand for such schools or New Zealand) there are still use your UK licence initially before
(globally it has increased 7 per a number of reciprocal social transferring to a European or
cent per year) you can’t just security arrangements. Check International Driving Permit (IDP)
assume you will automatically get with the Department for Work and which must be obtained before
a place. Pensions: www.dwp.gov.uk. you leave the UK?
Tax residency: If you move Healthcare: What medical Registering your arrival:
abroad permanently you will treatment will you be entitled to When you arrive you will need to
become a tax resident of that in your new country? Research register with the local authorities,
country. The rules surrounding this and the cost of private and apply for a residence permit.
tax residency can be complicated options. Some countries have a In some countries this will involve
so seek advice before you move, contributory system, others pay- getting an identity number; in
and the timing of when you move as-you-go GP visits etc. Find out others you may need to register
from one country to another can more at www.gov.uk. with the police. If you haven’t
provide tax advantages. Consult already done so through buying
companies that specialize in Make a new will: Assuming a property, you will need to open
giving tax advice to expats. you have a UK will for your UK a bank account too. Will you
assets, check it is up to date be entitled to vote? Visit
Moving money and before you go and make a new aboutmyvote.co.uk. | AIPP
pensions: Apart from using a one in your new country to cover
currency broker to move funds property and other assets there.
across to your new country,
consider simplifying your pension Logistics: Planning the actual
affairs before you move. You may move starts long before you
wish to transfer your pension want to go, when you need to
from the UK to a recognized gather estimates from relocation
scheme in your adopted country companies and check your
15AIPP BUYERS GUIDE 2018
TYPES OF
OWNERSHIP
hese days there’s it is, and whether it will suit your going into any sort of business
T more to ownership
than buying a
conventional
own needs best. Schemes are
only as good as the management
company (and you will pay in
with friends or family, it can often
be simpler in a professionally
managed set-up sharing with
freehold. Most people with busy some way for the management strangers.
lives and wide travel horizons expenses for such schemes –
are unable to use their holiday the so-called “fractional uplift”) Leaseback schemes
home for more than a few weeks so the market leaders can offer A successful business model
a year so alternative ownership confidence. Big names in the in France for over 20 years,
models exist. industry include Hilton, Marriott leaseback ownership schemes
and Wyndham. are found in holiday areas and
Fractional ownership Find out how much flexibility involve the owner leasing their
Fractional ownership, shared there is for usage, how you can (holiday) home back to the
ownership, destination club, exit the scheme etc, but some developer for a period of 20
residence club and timeshare (EU good news too: EU law to protect years usually.
law uses the word ‘timeshare’ the consumer of schemes The owner gets to use their
to cover all multiple ownership marketing to EU countries property for a pre-agreed amount
schemes) are all terms in use includes a 14 day ‘cooling off’ of weeks per year and gets a
for describing a concept where period and no money can change share of the income earned by
there is more than one owner of a hands in this time. letting out the property for the
holiday property. rest of the time. The hassle-free
The idea of sharing a holiday Co-ownership with and hands-off aspect of this
property with friends and family friends and family investment has proved popular
obviously makes a lot of sense: You can share ownership to – it’s often treated as a pension
various parties get to use a spread costs without being part pot - and buyers can get the
property for as much time as they of a big, formalised scheme, and 20 per cent VAT back on a new
need to per year, and save on the there are varying sized groups of leaseback property.
purchase and upkeep costs of friends or family that have reaped Some things to watch out for:
outright ownership. the benefits of “buying together”. as with fractional, the scheme is
In the 1980s some bad sales With the right sort of legal only as good as the management
practices of “timeshare” (in Spain advice and buying structure from company – the big ones in the
especially) knocked consumer the word go, co-ownership can French Alps are CGH, Odalys and
confidence and many fractional work well, but the key is to agree Pierre et Vacances – and beware
ownership schemes are keen to on all eventualities before you hidden running costs. Yields on
differentiate themselves from buy so everyone knows where freehold properties may well be
timeshare. With the share of the they stand. How will you divide higher, but their management can
freehold available to owners in up usage, will you allow third be a headache. | AIPP
some schemes, or investment parties to use it; how will you
into a property fund or portfolio, cover and manage maintenance
there are clear differences, and bills and what happens
although some schemes are when someone wants out of the
similarly selling periods of usage. property – or to sell up?
So know exactly what you are Of course disputes occur
buying into, how tried and tested between co-owners and as with
16AIPP BUYERS GUIDE 2018
RENTING OUT
YOUR PROPERTY
n recent years the what about access? How easily Management. How will you
I holiday home letting
business has proven
to be the fastest
reached by your target audience?
Beat the competition. Set
manage the bookings and/
or running the property? Ask
yourself if you are going to be
growing sector in the travel yourself apart from the rest in able to respond to booking
industry. Alongside the ongoing terms of presentation, USPs, enquiries yourself speedily, or is
popularity of the self-catering wow factors, affordability and/or it worth using an agency? Doing
holiday is the rise of the “sharing marketing. Clients tend to expect this all yourself can be hard work
economy” of renting out your Wifi and that welcome bottle of or impractical: how do you find a
home(s) to strangers, as shown wine, but how can you make your plumber at 11pm for your home
by the success of Airbnb. offering truly memorable? Make in Spain? Most people have a
There are plenty of instances of sure you “sell” the property’s plus local person on hand to deal
owners turning to rental returns points, whether it’s styling a lunch with key handover and potential
to help pay for tax rises, cover laid out on the terrace, or showing problems – so don’t forget to
mortgages or rising living costs. in pictures how the garden may factor-in management costs of
In fact more and more – now be used. 10-15 per cent typically.
around 60% - rely on rentals to
cover the costs of running their Marketing. Consider creating Finance. Once you’ve got
overseas home, and there’s your own website, alongside using bookings coming in, you will need
growing competition between the popular portals; embrace to organise your finances. You will
home owners. social media and last-minute need to pay income tax on lets
So don’t assume that just deals if you have void weeks. so investigate the tax locally and
by taking a few photos and Provide customer feedback as what running costs/community
uploading them on a holiday part of your advertising. One charges you will have and also
rentals website that the bookings agency has reported that offering what insurance you will need as a
will come flooding in. feedback is now one of the things landlord. Consider what currency
You will need to consider that all their most successful you will receive your rental
carefully several key aspects… properties share (and note that income in, and how you
you must request it to receive it). will pay management costs
Location. How can this suit locally. | AIPP
your objectives? What sort of Legalities. Are you permitted
occupancy levels will you need? to rent out your property for
Is a dual-season or year-round short term (holiday) lets? Is
sun destination going to provide there zoning (Florida) or specific
longer seasons? In winter-sun regulations within a complex? One agency has reported that
locations such as the Canaries
and Florida, three-month
In Spain, some regional
governments have clamped down
offering feedback is now one of the
lets to “snowbirds” are quite on holiday lets (especially the things that all their most successful
common; the lower weekly Canaries) so take legal advice
income offered by long-term lets on this: not just the word of an properties share (and note that you
can be balanced out by lower agent. Also, have you got the
management and marketing relevant insurance, do you need must request it to receive it)
costs. Golf or mountain resorts a licence and do you conform to
can be popular all year. Also, local safety regulations?
17AIPP BUYERS GUIDE 2018
OUR ROLE IN HELPING YOU TO
‘BUY RIGHT, OWN WELL’
IPP is a non-governmental, not-for-
A profit organisation seeking to improve
standards of professionalism in the
largely unregulated international
property industry. Our offices are in London.
AIPP is also a Trustee of the IESC – International
Ethics & Standards Coalition – www.ies-coalition.org
The role of the AIPP is five–fold: Important note about the service
provided by the AIPP
1 To freely offer qualified information
and support to UK buyers of a
We provide free and impartial information to UK
citizens about buying a foreign property. The AIPP
foreign property does not sell properties, but it is an association
made up of property sellers & associated companies
2 To bring together, under a strict code
of conduct, all professional companies
who voluntarily subscribe to the AIPP code of
conduct. The AIPP does not underwrite the business
in the business of creating and selling activities of its members. AIPP does monitor and
foreign property enforce its code of conduct and does, from time to
time, take disciplinary proceedings against members
3 To improve standards of
professionalism and accountability
that may lead to their sanction – but expulsion from
the AIPP is the ultimate sanction we can impose. In
in the industry common with other trade organisations, the AIPP
does not underwrite for the benefit of members of
4 To receive and deal with any complaints
about our members services including,
the public any shortcomings or negligent acts by its
members.
where appropriate, the passing of such That said, AIPP members are also subscribed
complaints to the independent property to the independent and specialist The Property
ombudsman who may recommend an award Ombudsman service. Members of the public
of compensation. can, at no cost to themselves, make a complaint
about an AIPP member which, if upheld by The
5 To lobby government and government
agencies for support and interventions
Property Ombudsman, could lead to an award of
compensation being made to the complainant of up
to protect British buyers and owners of to £25,000 – such an award being payable by the
a foreign property. Owners of a foreign AIPP member.
property can receive support from our While we try to ensure the accuracy of the
sister organisation; Alliance International information, AIPP cannot accept any liability arising
Property Owners, ww.aipo.org.uk from your reliance upon it, or from the inclusion in it
or omission from it of any data whatsoever.
18You can also read
