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Can't Afford The Uk? Obviously You Should Then Buy Abroad...


Scooter
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New horizons for first-timers

Rebecca O’Connor on the temptation of foreign property for those priced out of the UK market

First-time buyers are being targeted by a growing band of property experts who claim that anyone priced off the ladder in the UK should consider buying cheaper houses abroad, in locations such as Poland, Turkey or even India.

A new website, www.from55k.co.uk, from Parador Properties, one of the biggest British-owned property companies in Spain, promises aspiring homeowners the chance to buy a new two-bedroom apartment abroad for as little as £55,000. Another website, www.newskys.co.uk, also offers first-time buyers an overseas service.

A survey by YouGov, the polling company, shows that nearly half of 18 to 29-year-olds plan to buy abroad, and two thirds of these say that this would be their first property purchase.

The idea is alluring. This week the Royal Institute of Chartered Surveyors reported that some European housing markets enjoyed double-digit growth last year despite interest rate rises. An added bonus is that a plush flat in a sunny location could also bring rental income from holiday-makers, as well as providing a getaway destination.

Jonathan Burridge, of Quantum Mortgages, the mortgage broker, says: “This is still a relatively new concept and, as a pioneer in new territory, you can expect to meet bagmen and cowboys. However, there is gold to be had for the wise and the lucky.”

But experts advise that buying overseas carries a host of unpredictable risks and costs. Ray Boulger, of John Charcol, another mortage broker, says: “I am not surprised that overseas consultants are targeting first-time buyers — the low prices look appealing. But for most first-time buyers, buying abroad is wrong for so many reasons that it is difficult to know where to start. The biggest mistake is assuming that the overseas market will perform in the same way as property in the UK.”

There are predictions of a threefold increase over the next ten years on property in Prague and reports of high demand in Bulgaria. But Mr Burridge says: “This is speculative. The marketing literature looks attractive, but has yet to be proven right.”

An important consideration is the property rental market in the country in which you are buying. A strong rental market can mean weaker capital appreciation. Residents in France, Germany, Italy and Spain traditionally rent their homes. A flurry of foreign investment pushed up prices for a while, but the market is not driven by a homeowning culture over the long term, as is the case in the UK.

Even if the purchase price looks cheap, the initial costs of buying abroad are likely to be higher than in the UK, especially legal expenses. Mr Boulger says: “Legalities vary from country to country and prospective buyers should never sign anything they do not understand. This may mean hiring more than one solicitor, who will have to put in more work, which will mean higher fees.”

Stamp duty is also likely to be higher abroad — in some countries it is as much as 10 per cent, compared with 1 per cent for the average first-time purchase in the UK.

Despite ultra-low prices, particularly on new-build apartments, buyers should be aware that prices when they sell may not be as high as they had hoped. For example, the Spanish new-build market is active, but selling on apartments is becoming more difficult, meaning that sellers are having to accept lower prices.

This could be a problem for those hoping to use the profits for a deposit on a home in the UK. Mr Boulger says: “If the purchase does not go well and you fail to make a profit, this may scupper plans to buy in the UK.”

If you keep the overseas property while buying in the UK, it may be harder to find a willing lender because other mortgage commitments will be taken into account when deciding what risk you pose and how much you can afford.

Anyone convinced that buying abroad is for them should do some research. Mark Bodega, of HIFX, the currency exchange company that spe-cialises in overseas property purchases, says: “Nothing beats pounding the pavements. Look at the rental income generated by similar properties in similar areas. Target places that you can rent out year-round, such as European cities, and note how easy it is to get there.”

CASE STUDY: Nice price for Italian townhouse

Julie McIntyre rejected the £160,000 two-bedroom semis in the South East in favour of a 100-year-old townhouse with two roof terraces in Puglia, Italy, for €66,000 (£43,480). The 27-year-old sales executive, who cannot afford to buy in her home town of Maidenhead, paid a €17,000 deposit for her townhouse. Although the upfront fees were more than she would have paid in this country, the mortgage repayments on her Woolwich loan are much lower, at €2,045.41 (£1,348.44) every six months.

“This investment has given me a good balance,” she says. “I get on to the property ladder, I can afford the mortgage without rental income and I get a holiday home.”

The do’s and don’ts of buying abroad

DO calculate the costs. Even if the property is cheaper, fees and deposits can be thousands of pounds higher.

DO seek advice from UK-based specialists in buying abroad, such as Conti Financial Services (www.mortgagesoverseas.com).

DO compare mortgage deals from UK lenders, such as Barclays, NatWest, Norwich & Peterborough and Leeds & Holbeck building societies, with those from foreign lenders, such as Crédit Foncier in France. Foreign lenders sometimes offer better rates, but are less convenient.

DO arrange a mortgage in principle before signing any contracts and ensure that there is an opt-out clause if the mortgage falls through so that any deposit is refunded.

DO use specialist brokers, such as HIFX (www.hifx.co.uk) or Currencies Direct (www.currenciesdirect.com), to transfer large sums into another currency. They fix the exchange rate and can save you thousands of pounds in fees.

DON’T believe the hype. Visit the location and speak to other UK investors before buying.

DON’T rule out buying in the UK, if you can. It is still a less risky option. Scottish Widows, Standard Life and Accord offer professionals 100 per cent mortgages, and in some cases lend 110 per cent of the property value to help with costs.

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nearly half of 18 to 29-year-olds plan to buy abroad, and two thirds of these say that this would be their first property purchase.

Good to see that FTBs are taking affirmative action to secure thier future.

As Ive said for a long time, this is the future, forget pensions, this is the place for your money.

Far from foreign property being in a bubble this is just the beginning.

The neg - heads tell us emmerging property markets are a bubble waiting for a pin, however this incorrect, Europeans and Russians are getting richer quickly so the demand for real estate in tourist areas will outstrip supply.

..awaits abuse from the negheads...................................

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Good to see that FTBs are taking affirmative action to secure thier future.

As Ive said for a long time, this is the future, forget pensions, this is the place for your money.

Far from foreign property being in a bubble this is just the beginning.

The neg - heads tell us emmerging property markets are a bubble waiting for a pin, however this incorrect, Europeans and Russians are getting richer quickly so the demand for real estate in tourist areas will outstrip supply.

..awaits abuse from the negheads...................................

I am all for taking care of your future but in terms of wanting somewhere to live, this is nonsense and to me bubble evidence beyond question, right up there with the Knightsbridge broom cupboards. The idea that for people in their 20s or 30s with no other assets or investments, a speculative BTL in a country you do not know and whose langauge you probably do not speak is preferable to say a spread of shares/unit trusts as a pension seems to me ludicrous.

S.

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Guest Bart of Darkness
First-time buyers are being targeted by a growing band of property experts who claim that anyone priced off the ladder in the UK should consider buying cheaper houses abroad, in locations such as Poland, Turkey or even India.

Now that's what I call outsourcing.

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The idea that for people in their 20s or 30s with no other assets or investments, a speculative BTL in a country you do not know and whose langauge you probably do not speak is preferable to say a spread of shares/unit trusts as a pension seems to me ludicrous.

S.

I agree with you that people who are relying on this for their future will probably end up disappointed but..

If you knew the country well, and could speak the language, would it be different?

Mr.Mangle

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Good to see that FTBs are taking affirmative action to secure thier future.

As Ive said for a long time, this is the future, forget pensions, this is the place for your money.

Far from foreign property being in a bubble this is just the beginning.

The neg - heads tell us emmerging property markets are a bubble waiting for a pin, however this incorrect, Europeans and Russians are getting richer quickly so the demand for real estate in tourist areas will outstrip supply.

..awaits abuse from the negheads...................................

What you're saying Doggy might apply to places like Germany.....with Uk wages and much lower house prices but some of these ads for foreign property crow how you can get small flats for £30-40k usually in countries where the average income is a tenth or twentieth of here's.........eg Morocco, Bulgaria,

so who would you rent it out to cover your mortgage at £200 a month???...and like Scooter says overseas property investment isn't for young people with no other assets..........

Edited by Michael
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I agree with you that people who are relying on this for their future will probably end up disappointed but..

If you knew the country well, and could speak the language, would it be different?

Mr.Mangle

I suppose it might be different. With the retards that our schools and unis pump out, do you reckon that there will be many Hindi or Czech speakers amongst them? I don't.

S.

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:lol: Can't afford Daffs eh! Loser! I've got six bulbs already, and I'm remortgaging three of them so I can pick up some more.

As you agent I warm against that as the Met office warns of snow :blink:

Buy in Poland they cry, It's a lovely place if you love Poland......... :P

Edited by 234SALE
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