In many overseas locations you can still bag yourselves a bargain – you can buy an apartment in North Cyprus from GBP 50,000, you can buy a villa in Brazil from GBP 100,000 and everything in America is about half price these days what with the weak dollar and all! So naturally this, combined with the British thirst for property ownership and our desire to have a place in the sun, means that more and more of us each year are planning on buying property abroad.
However…there are hidden costs when buying real estate abroad that few take the time to tell you about properly. For example, did you know that you can pay over 19% in stamp duty alone in France depending on the property you buy and your own personal circumstances – with fees like these coming in on top of the asking price, your bargain basement property abroad suddenly looks more expensive than a flat in Mayfair! In this article we’ll take a look at buying property abroad and the hidden costs related to doing so.
First things first you need to know that in the UK, the cost of buying a property is about 5% of the asking price of the house you’re interested in. This should be the guideline figure against which you compare other nations. In terms of additional costs we’re talking about everything from stamp duty to lawyers’ fees, estate agents’ fees, taxes and property registration costs. You may also need to add on mortgage application and/or arrangement fees, notary fees, purchase tax and/or VAT, an annual occupation tax which is applicable in Morocco for example – and then if you’re profiting from your property you may well encounter income tax on any rental received and of course the dreaded capital gains tax, which may well be payable on the profit you derive when you sell. In countries such as Germany where they are anti-people making a profit, you are taxed massively if you sell within five or ten years of purchase – so be careful.
The best words of advice are – forewarned is forearmed. Or in other words, ask up front about the amount you will incur in additional taxes, fees and charges on top of the asking price. You will then know how much you will have to find, how much of your budget you can indeed use for the actual property purchase and how much will be effectively ‘lost’ in the purchase transaction. If you want to buy cheaply may we suggest you look at countries such as Denmark, Iceland and Slovakia where fees come in under 5%, or perhaps Norway where fees are equivalent to those we pay in the UK.
If you really do want a place in the European sun though, be prepared to face fees of up to 18% in Belgium, 17% in Italy and 16 – 20% in France. Bad huh? But it could be worse – buy in South Korea and expect fees of about 22%! Again, we will reiterate that you need to know before you commit to buying how much you will have to find in additional fees, so get on the internet and get hunting, speak to agents and lawyers in the country in which you will be buying and if possible, find expats and foreign buyers who have been through the process before you. Ask about their experiences and find out all about any hidden costs so that you are prepared.