Despite the fact that the global financial landscape is less than healthy and we’re all growing increasingly concerned about the cost of living, fuel prices and mortgage rates, we still have an almost insatiable appetite for buying property abroad.

Recent facts supplied by Datamonitor show that British and Irish property investors already have 3.81 million properties overseas and if you’re thinking of adding to this number, in this article we look at the 10 most costly mistakes that people commonly make when buying property abroad so that you can avoid these mistakes.

As stated, Datamonitor has information to show that 3.81 million properties are owned internationally by Brits and Irish and their figures suggest that there will be a doubling of the overseas property market in value terms between now and 2012.  Estate agents have predicted that there will actually be an average of 13% growth annually over the course of the next 5 years and all in all, the overseas property sector was worth GBP 44.4 billion in 2006 to British and Irish investors.  So when you think about how many buyers actually make costly mistakes, imagine how much more affluent the overseas sector could be if we all avoided making these mistakes when buying property abroad!

If you or someone you know is actively contemplating buying property abroad, here’s what to watch out for: –

1) Choosing the wrong location – not all property markets that are being advertised as the next big thing are actually particularly profitable.  You need to look more closely at what is driving the growth in a given market and see if that is sustainable.  When Bulgaria’s Black Sea coast was being marketed as the next big thing in 2005, few people thought about the impact that a glut of property coming to the market would have on prices and the ability to profitably resell.  Look at a location with astute eyes and see what there is to ensure its continued and continuous success.  Only buy in when you are sure that there is long-term room for growth and profit.

2) Choosing the wrong property – in a low value market don’t target the high-end, in a property market with an oversupply of office property avoid the commercial sector, where there is no resale market for apartments don’t buy flats!  Think about where there is demand and buy property accordingly.

3) Forgetting about your domestic tax liability – if you profit from property abroad you may well have to pay income and/or capital gains tax in the UK on your profits – don’t forget to factor this in to your profitability calculations.

4) Not understanding about title deeds – the title deed registration system varies from nation to nation and in some countries it is so out of date that it can be almost impossible to determine who has the right to sell you land or property.  In other countries there are ongoing battles about title deeds and finally, in some countries you as a foreign buyer are not entitled to directly hold title to a property and you have to buy through a company instead.  Find out up front about the title deed quirks of the country you want to buy property abroad in.

5) Failure to look into local laws of succession – you may think your property abroad is covered by your UK will – that may not actually be the case.  It is often better to have a will in each country and even more significantly than knowing this fact is that you should know that the laws of succession differ from nation to nation.  In France for example, you may think your property will pass to your spouse should you die – but in reality the property can be divided among multiple members of your extended family.  So find out first about the laws of succession and make sure your will covers your wishes and can legally be upheld.

6) Forgetting about those pesky exchange rates – if you live and work in the UK, are paid in pounds and all your accounts and investments are in sterling, if you buy a property abroad in anything other than pounds sterling or you earn an income from your overseas real estate in a foreign currency all of this will have an impact on you because exchange rates fluctuate.  Speak to currency specialists about what you can do to offset any risk of negative fluctuations.

7) Forgetting about your overseas tax liability – if you own a home overseas you may be liable to property tax, VAT, capital gains tax, income tax and even inheritance tax abroad as a result.  Find out up front and look into whether there are any double taxation agreements in place between the country you’re buying in and the UK.

8) Exit strategy?  What exit strategy? – It’s all very well buying a profitable property abroad that appreciates and reaches the level where you want to sell it and reap your gains – but what if you can’t actually sell it!  Think about what you are buying and the market you are buying in and think long-term about off loading your property stock when the time comes.  This is called having an exit strategy, and if you’re dabbling in property, trust us, you need one!

9) Who needs a lawyer anyway? – You do!  Do not buy without the help of an independent, experienced legal representative, please!  And ensure they are experienced in real estate in the nation you are buying in, ensure they speak English and the native tongue and are qualified to assist you and look after your best interests.

10) Do I really need local help? – Would you consider buying a property in Scotland from an estate agent in Wales?  So why would you consider buying a property abroad from an agent in England who has no representatives in the overseas country with local knowledge to assist you?  Think about how valuable you know local knowledge can be – and then apply it to your common sense thinking about how you are going to go about buying a property abroad.

As you can see from the above list of 10 costly mistakes when buying property abroad, if you apply common sense and think about the purchase in the same way you would think about buying a house in the UK you won’t go too far wrong.  Just take your time, do your research, get some professionals on board to help you and be guided by your sensible instincts.