8 key things you ought to know about buying property overseas

As featured in Your Property Network – September 2008 Edition

Overseas Property Investment - What are 8 key things to consider when investing in property abroad?

There are some fantastic opportunities to make returns on property abroad. Some people, however, may not feel confident about where to start. Finding someone to trust and give guidance on what to look out for, can be difficult.

First there are a lot of “soft” issues to address, like the in-country culture and  communication. When investing in Poland, for example, it is surprising how different service standards are between Polish and UK banks. Some suffer from bureaucratic processes, others are more modern and internet-based.

Second, when conducting a transaction in a foreign language, a lot of the subtleties are squashed. So if you are looking to invest in a buy-to-let for professionals, with formal legal contracts, then this should be clearly stated, otherwise you could end up with a casual letting arrangement to multiple students.

Some of the “harder”, issues to look out for relate to building or buying process differences, such as…...

Third, raising finance overseas. Getting secured lending at decent rates in the UK is challenging currently, as banks use tighter underwriting criteria. In countries like Poland, banks tend to be more risk-averse to begin with. Investors are likely to be asked to provide more credit information e.g. credit reference reports, which would normally be done automatically by UK banks, as well as details about the property, which would usually be provided by the surveyor (not a culturally normal thing to do in some countries).

Fourth, a significant difference between the UK purchasing process and many in Europe, is the need to go before a notary (a specially licensed lawyer) to sign the preliminary and final agreement. Whereas UK exchange and completion can occur without the buyer having to be present.

Fifth, costs related to the purchasing process can also differ significantly from buying in the UK. Whilst stamp duty tends to be higher in the UK, the overall conveyancing costs are cheaper. So whilst in the UK costs may represent up to 7% of the value of the property bought, (including 3% stamp duty) this could be between 6-10% abroad.

Sixth, build finish standards differ. In Poland apartments are usually finished to “black standard”, which means the building is plastered, but not supplied with flooring, kitchen or bathroom. This is similar in Bulgaria too, where builders finish to “Bulgarian Standard”, especially in the capital, Sofia. So check you are getting “white finish”.

Seventh, on the upside, getting on the property ladder abroad can be a lot easier than in the UK, with prices starting at £40,000 for studio apartments in cities, such as Sofia, Bulgaria. This has no doubt helped fuel the BARBie trend that has been talked about (Buy Abroad Rent in Britain), as a viable alternative to buying in the UK for first-time buyers.

Lastly, it is self-evident that being well-informed, means you are well-armed. Understanding the idiosyncrasies of buying overseas property, or at least using someone who does, can help ease the process, so that there are no unnecessary surprises.

Posted on 7th May 2008 by: Louise Reynolds, Property Venture^®

Property Venture^® is an independent, UK-based agent. We reduce the hassle of buying abroad for time-strapped investors, providing end-to-end knowledge, expertise and guiding through the buying process. Overseas members of NAEA

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