Top tips if you’re planning a move abroad
However, there are Brits located all around the world; 33% of all British-born emigrants living outside the UK are in Australia or New Zealand, with 28% in the US or Canada.
This compares to 49% of French-born emigrants living outside France living in the EU and 44% of German-born emigrants living outside Germany were living in the EU.
David Reith, head of Hargreaves Lansdown Currency Service, gives top tips for those considering a move abroad:
1) Location lemons
Often people fall in love with an area when they are on holiday, but it can be very different when you’re actually living there. Everything from local schools to shops and transport can become far more important. You’ll also need to bear in mind how easy it will be to travel home, and whether there are affordable flights or easy access for ferries. If you are buying to let during certain times of the year, make sure you have the kind of property people want to rent in the area.
The answer lies in exhaustive research. Attend international property shows and speak to the experts, subscribe to magazines and websites devoted to expats in your chosen country, and ask plenty of questions in the forums. When you have narrowed down an area, you need to take plenty of trips to get an understanding of what life is really like there.
2) Legal lapses
Property purchase works very differently around the world, so you need to be careful. In France, for example, the notaire overseeing the sale of the property acts on behalf of both the buyer and the seller, so it’s vital to get independent advice. In Spain, meanwhile, larger developers will tend to employ a lawyer and offer you their services, but it’s essential to have your own advice. And in Portugal you will need to be registered in Portugal for tax purposes before the purchase takes place.
Before you buy, take the time to find a good, local, independent, bilingual lawyer with no ties to the vendor. Lawyers perform different functions in different countries, so don’t assume they will do all the necessary background checks: get to grips with their responsibilities and yours.
3) Practical problems
The move can be more complicated and expensive than you think. There may be issues over shipping your belongings, and the suitability of your furniture for the property and climate, so you need to consider the details. There may also be one off costs including estate agency fees, legal fees and local taxes. In France, for example, you can easily spend 10% of the property prices on fees and property transfer tax.
You can’t avoid these things, but you can think them through, and ask questions from expats and locals so you avoid transporting a leather sofa to a humid climate or face unexpected bills as you go through the process.
4) Mortgage mistakes
Remortgaging in the UK to afford an overseas property may seem more familiar, but a local mortgage may make more sense in more developed markets.
In France, for example, you may get lower rates and find mortgages geared towards non-residents. There may be some benefits to having a mortgage, because some countries will let you offset the interest on a mortgage against any rental income, and others only charge capital gains tax on equity – so having a mortgage will keep a lid on tax bills. However, they may have challenging loan-to-value maximums and income requirements. You will also make repayments in the local currency, so will be subject to market movements.
It’s worth speaking to an overseas mortgage specialist, who can talk you through the considerations and help you find the best approach for your circumstances.
5) Buying when the currency is against you
At some point you will need to transfer money into your chosen currency in order to pay for the property. At times of currency volatility, timing can make a huge amount of difference, and if you’re not careful, could move your dream property out of your price bracket between viewing and buying.
Use a currency specialist to fix your exchange rate, so regardless of how the market moves, you can be certain of the price of the property.
6) Overlooking ongoing costs
There are a huge number of ongoing costs to consider. Some apartments and houses on developments will have high maintenance fees. There may also be additional costs you don’t face in the UK – such as air conditioning and the swimming pool.
You also need to bear in mind local taxes, which are subject to change. In France, for example President Macron has increased social charges for landlords and council tax for some non-residents.
Plus there’s insurance to consider, including health insurance. Healthcare provision varies dramatically, so in some places comprehensive health insurance is vital, and elsewhere you’ll need top-up insurance.
All these things should form part of your initial research, and it’s worth keeping an eye on political developments in your chosen destination – both national and local – to see how issues like taxation are changing.
7) Pension pitfalls
You will still be entitled to the state pension if you move overseas, but if you become resident in the new country, it will only benefit from annual rises and the triple lock if you live in the European Economic Area, Gibraltar, Switzerland or a country with a social security agreement with the UK. Elsewhere your income will be frozen at the rate when you leave the UK. Some 33% of all British-born emigrants live in Australia and New Zealand – where pensions are frozen.
Check whether your plans will mean you are considered to be living overseas. If so, you need to be aware of the state pension arrangements, and how they will affect you. If you have sufficient private pensions, it may not affect your plans. However, if the state pension is a significant part of your income, you may need to rethink the move.
8) Currency calamity
If you have income from pensions, rental property or investments from the UK, you will need to convert them into the local currency. Volatility in the exchange rate can cause problems if it means your income falls and your expenses remain the same.
It’s vital to get the best possible rate, and a currency specialist may be able to secure a far better deal than that available from your bank. In addition, a currency specialist will be able to set your exchange rate up to two years in advance, so you have some certainty over your income in the short-term.
9) Legal loopholes
There may be broader legal considerations in the destination of your choice, including estate planning. If you are resident for tax purposes overseas, there may, for example, be rigid rules over how your estate is left.
You should get to grips with any rules regarding how a property is dealt with after your death in the country of your choice, and factor this into your estate planning.
If you are considering buying in Europe, there may be long-term consequences of Brexit, as well as short term market movements as announcements are made.
Some people have chosen to put off a purchase until the position is clearer. Others are pushing ahead, but need to keep abreast of developments. If you are worried about the impact of market movements, a currency specialist can help you reduce the risk.