It’s all very well for Dave Isley, head of NatWest International Personal Banking, to state that Brits are finding it ever easier to integrate abroad when they move in retirement – as was reported on the Age Concern website recently – but what about the fact that the current state of the economy in the UK is having a very real and detrimental impact on those who want to escape Great Britain?
We certainly appreciate that there are increasing numbers of Britons seeking to live out their retirement overseas in a more attractive, cost effective, safe and welcoming environment than the UK currently offers, but with properties not selling at home and property markets abroad faltering, it’s maybe not as easy as it once was to expatriate. In this article we take a look at how the credit crunch is affecting Britons who want to retire abroad.
Earlier this year the British government made a tentative announcement relating to the abolition of stamp duty – this effectively put the entire property market on hold. Who in their right mind would buy a home today, when possibly tomorrow there would be a stamp duty amnesty that could save them hundreds or even thousands of pounds? When the government finally announced this week that it was freezing stamp duty for one year on all homes valued up to GBP 175,000 many assumed that this was good news and would now bring all those hungry buyers back to the market…
However, what the announcement has really done is put a cap on the price of property, with anyone who has a house on the market valued up to around the GBP 190,000 mark now highly unlikely to get any offers over GBP 175,000. This has wiped thousands of pounds off thousands of homes. If you’re a retiree about to sell up and ship out abroad, this could have put paid to your move or at least reduced the real amount you will have to play with once you have sold. And that’s always assuming that you’ll find a buyer.
In a recent article in the Daily Telegraph, Mark Bodega, director at HiFX reports that his company has seen a massive increase in the number of people who want to move abroad, but nowhere near the numbers who want to move are actually able to – because they cannot sell their UK homes. Buyers cannot secure mortgages, those who can secure them are still reluctant to make a move now as the market is being talked so far down that they are waiting to guess the bottom before they buy in. This is stagnating the property market and seriously affecting the dreams of those who want to move overseas.
We can be flippant and suggest that keen retirees simply rent out their property in the UK and rent abroad for a while – but how practical a suggestion is that for most people? Moving abroad is a huge undertaking – especially when you’re reaching retirement and you want to reduce the number of stresses and strains in your life. If you take the rental option you have continued links to the UK and continued concerns about both your home in the UK and the security of your rental contract in your new country of choice. Sure, for some people this option is viable – but for those with a visa to emigrate to Australia, New Zealand or Canada for example, it’s not going to be so easy to keep commuting back to the UK to check up on property matters.
In another twist of negative fate for would be expatriate retirees, the British pound is suffering significantly against many of the world’s dominant currencies – this means that a Brit’s purchasing power abroad has been severely diminished. If you’ve recently been on holiday to anywhere in the eurozone you will have noticed how much more expensive everything appears to be – well now think about if you had to live abroad on a fixed retirement, sterling based income…how would you be faring? Yes the cost of living in the UK is rapidly spiralling as inflation seems to be reaching the point of going out of control, energy price rises are not just shocking they are crippling, petrol companies are still inflating the price of fuel despite the fact that oil prices have just fallen, and what is the government doing about it? I have no idea! No one has any idea – they seem to just be hoping the entire crisis will go away and fail to materialise.
A further credit crunch related issue affecting many who want to move abroad in retirement is interest rates. The Bank of England are under increased pressure to cut interest rates by the end of the year – if you have any form of savings or investment related income that is governed by the amount of interest you can earn this is not going to be welcome news. It will mean you have fewer pounds with which to buy fewer euros for example.
So, is it all doom and gloom?
No, definitely not.
There is always a silver lining to every cloud – and that silver lining for many people is actually overcoming the odds and actually realising their dream of a new life abroad. To do so in such a tough economic climate requires stamina, commitment, careful planning and caution. Retirees must first ensure that their UK house is in order before they commit to any move abroad. To do so it may be a question of deciding whether to commit to one or even a few more years in work, to decide whether to sell a family business now or wait a few years, whether to attempt to undercut the market with a property for sale price or again, wait a few years and to look at getting the best rates of interest on savings income. With every angle covered, then and only then take the first tentative steps towards moving abroad. Remember that currency fluctuations can be protected against with the help of currency specialists, and in markets such as Spain and Cyprus where housing markets are also going through a tough time, vendors and developers are very keen to sell, making it a buyer’s market. Take maximum advantage of this fact and haggle and negotiate hard.
However, one final word of warning, ensure any monies paid out for a home abroad are held in some form of secure and guarantee backed escrow if buying off plan, check out what protections are in place in case a builder goes bankrupt on you, always use a lawyer to ensure any sale is being done legitimately, and again, cover all angles with caution and proceed with care.
Nothing is impossible – but the credit crunch has certainly made things more challenging for those who want to retire abroad. On the flip side of this, one could say that actually the credit crunch and the grim short-term outlook for the UK as a whole has been wholly responsible for a massive jump in the numbers of people seriously committed to escaping UK for a new life overseas!