The property market seems to have taken a slight hit after the Brexit result, and investors have been affected in no small way. Experts have advised investors that, while the price of property in the UK may be on the rise during this period, it provides ample opportunity for investment in foreign markets such as Venice or Lisbon.
For vacationers who aren’t residing in Egnazia in Italy or Pine Cliffs, Portugal-–purchasing your own place gives you the freedom and security you need when on a long holiday. However, it isn’t just enough to go a-buying just because.
Here are 5 major things to consider first:
1. Check Out the Residence Regulations
As mentioned, just because you can buy a home abroad doesn’t mean you have the right to live in it. Before Brexit, going to Europe for summer was as easy as purchasing your flight tickets. Even though no significant announcements have been made yet regarding changes in travel, it is not safe to dismiss a proper check on the rules regarding owning a home in a European country. It is advisable to work with property experts who are in the know regarding such issues.
2. Line Up Medical Insurance
As a foreigner, having international insurance is necessary before travelling to another country. Many policy providers offer affordable coverage which you can purchase off the internet. For older people, there are often some government sponsored health insurance schemes available. Insurance policies vary depending on the duration of stay for each individual.
3. Watch Out for Taxes
Owning a home in a foreign country could subject you to additional layers of taxes. Some countries like France have a tax charge for nearly everything. If you buy a home and rent out the property to a tenant, the income made is subject to taxation. Home owners in Italy, though, are eligible for tax rebate of 24% when they renovate their old property. So if you are about to buy a home, find out if it was recently renovated so that as a new owner, you can enjoy some tax relief. Watch out for transferable taxes from the previous owner.
4. Beware of Estate Traps
Find out the rules for intestacy inheritance. If you own a property in the UK, it is shared according to your will states, and if you die intestacy, wealth distribution is decided by the court. But in other European countries, the rules change. See forced heirship. You may need to write a separate foreign will if you hold property in a country that operates a different inheritance law.
5. Consider the Currency Exchange Risk
It is important to consider the currency risks, especially if you will be renting out your property. You may want to obtain a bank loan to buy a property “buy-to-let”. Interest expense lowers the taxes you would have to pay on rental proceeds, both in foreign jurisdiction and home country. Most banks typically allow 80% of the total property cost, and the advantage is that you can benefit from inflation because your home value and rental charges increase while your debt remains the same. So depending on the strength of the currency, you may decide to borrow from the country’s bank or from your own local bank.
However you choose to go about it, make sure you work with a trusted financial adviser who will guide you through every transaction so that any possible risk is mitigated.