For young people in the UK, getting on the property ladder is becoming more and more of an unattainable goal.
That’s why some are looking abroad to make their first step towards owning a home.
Research by home and contents insurer Urban Jungle found that, despite four in five 18-35-year-olds actively saving to put down a deposit within the next five years, at least a third claim they won’t be able to meet this target.
Some 25% of respondents to the poll said they were seriously considering looking abroad for their first home due to the high cost of housing in the UK.
But is this a viable option? We asked property experts about the pros and cons of taking your house search abroad.
Is it really easier to purchase a home in a different country?
According to Miranda John, director of international property finance at mortgage broker SPF Private Clients, the practicalities of buying overseas isn’t always an attractive option for first-time buyers.
‘When buying property abroad, it can be tricky for first-time buyers as loan-to-values (LTVs) are not that high.
‘Most lenders in Europe will advance up to a maximum of 50 to 70% LTV, while in France it is only possible to borrow a maximum of 80%, meaning you will need a sizeable deposit, thus making it more difficult to save.’
She adds that legal fees for buying a property abroad range from 7.5 to 12% of the purchase price, and banks don’t lend on these fees meaning additional savings will be necessary.
For property specialist Paul Gibbens, whether or not buying a house abroad will be more affordable simply depends on where you look.
‘For example buying a home in Paris (one of the most expensive places to live in 2020) would not be a very realistic option for a young person.
‘However, a city like Montepellier is much more affordable and a practical option for young people.’
Gibbens recommends finding the best rental yields (the profit you could make from renting) in different countries and cities to make an informed and safe decision.
Looking at rental yields will be ideal for people who aren’t sure whether they want to move abroad or buy a holiday home in a different country.
It’s also important to get to grips with the legal proceedings associated with buying a home in a foreign country.
‘It is advised to seek independent financial and legal advice from a specialised firm before buying a property abroad,’ says Gibbens.
‘Generally speaking the basic process for buying a home in the UK and abroad a similar.
‘Searches are carried out to ensure the seller and property are legit, a contract is agreed between both parties and then a deposit is paid and a title deed is signed to show change of ownership.’
Seeking help from a local solicitor or conveyancer is necessary to tackle things like fees, timescale and the overall process of buying a property, as these things differ from country to country and require a lot of research.
The benefits and difficulties associated with purchasing a home abroad
What are the difficulties?
- The need for a good amount of capital to begin with which is something young people would struggle with a little more
- You’ll have to cover all fees related to the sale and maintenance of the property
- If you’re not there yourself or you don’t have someone you trust to manage to the property you’ll have to pay out more to a management firm which is not always a good option
What are the benefits?
- You’ll have a permanent holiday home (at least until you decide to sell it)
- If you put it on rent you’ll receive much more than a typical buy to let house in the UK
- Generally speaking it is a stable long term investment
Paul Gibbens, property specialist
Where to start if you want to buy a home overseas
If you’re swaying towards buying a home overseas to give yourself a nudge onto the housing ladder, here are some tips for getting started.
Identify a target location
Taking into account legal processes, additional costs and rental yields, you’ll need to choose your ideal destination.
Maybe you already have somewhere in mind, but taking the time to think about where your investment will generate the best returns is essential.
Tim Swannie, who founded Home Hunts, a buying agent with properties in France and Spain says: ‘You might want a holiday home by the beach, but whilst many seaside resorts are popular during the summer season, they can also be fairly quiet in winter.’
For a better rental return, consider buying in locations that attract tourists all year round.
Make sure to visit – on and off season
Choosing somewhere to buy a home isn’t as simple as throwing a pin at a map and seeing where it sticks.
If you think you’ll be spending a lot of time at your overseas property, having an understanding of the local area and whether you truly like it is essential.
Experts advise trying to rent in your chosen location for an extended period of time so you can experience it like a local.
Look at the property that is right for you
Again, buying a home abroad shouldn’t be seen as different to buying one in the UK.
Knowing what you need and what you don’t want will be vital.
Make sure to view a range of properties and keep an open mind while shopping around.
‘We’ve all seen photographs of a dreamy farmhouse in rolling countryside, but it may not necessarily match your desired lifestyle,’ says Swannie.
‘For example, privacy does not have to mean being isolated–if you don’t like driving for twenty minutes to reach the nearest shop, life might be less relaxed than you had imagined.’
Research your visa requirements
Visa requirements may dictate how long you can stay in your new home each year, experts say.
If you’re not planning a full move to a new country, it’s best to check how often you’ll be able to visit and if it feels worth it.
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