As the holiday season approaches, a second home in the sunshine will be on the wish list of many of us, particularly after last winter! For an increasing number of people in Scotland and other parts of the UK this dream is becoming a reality – figures suggest that as many as one million of us now own properties outside the UK. So, if you’re one of the lucky ones considering buying a second home abroad, what are the points that you need to bear in mind?
First and foremost you should decide how much you can afford to spend. Often there will be costs that you didn’t anticipate - for example local purchase taxes can add significantly to the overall outlay. If you need a mortgage to fund the purchase, research how much you can sensibly borrow, and consider whether it would be cheaper to have a mortgage in the country where you are buying. Going forward, what costs will you have? Are there local property taxes, and will there be regular maintenance charges for the property? Will you need to complete Tax Returns and pay tax in the UK and/or your chosen location?
Location and Use
Once you are clear as to how much you can spend, the main decisions will be location and the use to which the property is to be put. If you intend it to be just for private use, potentially the world is your oyster, although some locations will be more accessible and offer more opportunity for capital growth than others. If, on the other hand, you need or would like to generate rental income, it makes sense to buy in a popular location that can be accessed cheaply and easily from the UK. Considerations such as proximity to the beach, restaurants and tourist attractions might also be more relevant.
Wherever you decide to buy, it will be important to get professional advice upfront. Using appropriately qualified advisors who speak both English and the local language and who also have experience of the property market and the laws which apply in your chosen location, should mean that the process is as stress free as possible. And if you are buying a new property, you should avoid using an estate agent or lawyer who is linked to the developer as you may not get unbiased advice considering your best interests. If you have a recommendation from a friend or contact who has already been through the process in the country, so much the better.
You will also want to understand, in advance of any purchase, the succession rules which will apply to your holiday home. As noted elsewhere in this issue, some countries have fixed rules which govern succession to property and it will be important to know how these impact on you and your family, and whether they can be avoided by structuring the purchase in a particular way. Even if you are free to determine how the property is to pass on your death, you should consider whether you need to update an existing Will or even make a Will in the country you’ve chosen.
Finally, tempting though it may be if your finances do not stretch to buying a property of your own, we would caution against buying into timeshare arrangements. Whilst there are undoubtedly many legitimate timeshare companies out there, experience has shown that timeshare ownership can often end in tears, with the purchaser left with no capital value, but an obligation to meet substantial maintenance costs for many years to come.
In summary, there is a lot to consider when buying abroad, but provided that you do your homework, and get the right advice, it can be a straightforward process. Then, you’ll be able to focus on all those sunshine holidays ahead of you!