The slump in the market witnessed over the past ten years seems to finally be on the up and up, particularly in Spain, which has always been a top destination for Brits looking for a more relaxed lifestyle and of course the great weather!
Whether you are looking for a holiday home or permanent place to retire there are certain hazards attached to buying abroad. To ensure your dram does not turn into a nightmare here are eight common pitfalls that you need to be aware of and so help make the right choices.
1 – Location…Location….
Of course, certain areas are less expensive than others. Additionally, the cost of living can change quite substantially depending on where you live. When choosing a location everyday costs need to be taken into account. For example, if you purchase a house off the beaten track travel costs will be higher compared to living closer to a town, or in a town. Public transport might not be available which means you need to run a car, which is another expense. Internet is usually much more expensive and perhaps even unavailable in some rural areas. The cost of everyday groceries can be forty, maybe even fifty percent higher if you buy from local privately run businesses. Old, large properties might seem picturesque in summer, but in winter they can cost an arm and a leg to heat. Electric is particularly expensive in Spain. Wood burners are common in older properties and equally expensive to run. While the house maybe cheaper your everyday costs can be very expensive depending where and what you buy. When choosing a property it is important to consider these things and not just the property price. Do your research. Visit the areas you find of interest and ask the locals how things work.
2 – Legal Issues
All countries have their own property laws and these can be quite surprising in Spain. For example, in Spain a contract written solely in English is not a legal and binding contract – It must be in Spanish even if the seller and buyer are English. It is not uncommon (particularly for property developers) to offer the services of their own lawyers. It is very unwise to presume that things are done the same or even similarly to the UK. The best step forward is to get independent advice before you buy and ensure they have absolutely zero connections with the seller. This can be particularly difficult in more rural areas of Spain so do take care. While it is a legal necessity for any legal contract to be in Spanish demand it is also translated to English – Thus ensuring you know exactly what you are signing.
3 – Mortgages
UK Banks are not as willing to lend money on Spanish property since the 2008 meltdown. If you have equity in your UK home a good way to raise capital is to remortgage.
Mike Smith of local firm Javea Properties on the Costa Blanca tells us they have seen a threefold increase in buyers with UK mortgages approved, which is quite a turnaround compared to previous years.
Another option is to apply for a mortgage in Spain. Mortgage rates can vary quite extensively so shop around. However, do not presume that because your credit is good in the UK it will be a matter of course to get a mortgage in Spain. When assessing your budget make sure you also allow for notary fees, legal costs and taxes as well as insurance and actual moving costs. If you are buying a property to rent make sure you will be able to cover your mortgage by doing the math.
4 – Currency Exchange
It is amazing how quickly currencies change. Timing is everything. You could save literally hundreds of pounds being thrifty with regards to with who and when you choose to transfer your money. Banks are usually the least profitable. Some do offer zero commission but the exchange rates they give can be less than desirable. Shop around the many currency exchange companies now available to compare charges and exchange rates. The arrival of Brexit could make this even more volatile: The pound could weaken. Some companies offer ‘forward contracts’ which can lock the rate for up to a year.
5 – Annual and Ongoing Costs
Once you do actually go ahead and buy a property remember the costs do not stop there! If you buy a property / apartment on a complex yearly maintenance charges are often applicable; these can be quite significant if a communal pool and gardens are included. In addition, like the UK, there are local taxes that need to be paid yearly. Ensure you always look for the best exchange rates and if applicable, you are able to charge enough rent to meet these ongoing costs.
6 – Moving is Never Easy
They say moving house is one of the most stressful things you can do – Right up there with divorce! Relocating to another country can be a mammoth task. Opting to DIY can cut costs, but underestimating the task probably means it’s going to end up in tears. It is easy to overlook issues such as access. Hauling a large truck across Europe only to realise it cannot actually access your property is a common mistake. Additionally, think about the furniture and goods you are taking. Do you really need them? Is it cost effective? Will they even last a Spanish summer? Get several quotes from reputable companies and do your research to make sure you don’t get caught out.
7 – Pension Problems
UK state pensions continue to be paid if you stay within European countries that have a social security agreement with Britain. If you relocate to Australia or the USA for example it is a whole different ballgame. If your state pension is paramount to your retirement this also needs to be investigated. The rules can change quite substantially from country to country and the penalties can be high.
8 – BREXIT
The financial implications of Brexit are still unclear, particularly with regards to how it will affect the value of the pound. Many are choosing to wait until things are a little more settled before packing up and shipping out. In reality, this could be a good thing but then again, it’s all so up in the air so putting off your purchase might not turn out to be the right choice after all. Keeping up to date with the political developments and speaking to a Forex advisor can help you make the right decision for you.
If you speak to anyone that has actually made the move to Spain or any other country most will tell you the same. Whatever you do, don’t rush! Take your time to find out the facts and do the math – This is the best way to avoid the hazards that befall many when deciding to buy abroad. Good Luck!