Is the future really francs and florins?

The white buildings form a sharp contrast with the dark volcanic rock of the Greek island of Santorini. More pictures below.

G'day, Bonjours, Allo Allo

Where would you like to move to? Australia is numero uno, followed by Spain, New Zealand, Canada, France and the USA in attracting British emigrants. Some emigrate outright, while others buy a holiday home abroad for a test drive. About 350,000-400,000 Britons emigrate annually.

M&Ms - Tempting Investors

Where would you like to buy an investment property?

Malaysia? Mongolia?

Mama Mia. British investors are also being tempted to buy property in far-away locations such as Brazil and Argentina. Asian countries are now investment candidates on a list that includes Cape Verde, Dubai, South Africa and Egypt in addition to the usual suspects of Spain, France, Portugal and Switzerland.

Are these more obscure, geographically remote locations good investments? Your guess is as good as mine, and if it is a guess, why take the chance? Solid investment decisions require solid research.

Foreign Currency - Exchange Rates

After many years in the $1.50-$1.70 range, in 2007 the weakening US dollar traded at over $2 to the pound ($2.11 on 8 November 2007).

A rate of $2 to the pound is a godsend for Britons interested in buying property in America. It is also ideal mathematically (multiply by two, divide by two, easy peasy) for demonstrating the impact of exchange rates on prices.

Example I: a US property selling for $500,000.

Example II: a US property selling for $250,000

After hitting $2.11 on 8.11.07, the dollar dropped (that is, the dollar strengthened) to $2.05 on 15.11.07. Six cents does not sound like much, but in percentage terms, the fall was just under 3% - in a week.

A property selling for $250,000 would have cost £118,000 at $2.11, and £122,000 at $2.05. Six cents equated to £4,000.

Should You Buy a Foreign Property?

Yes, why not?

There are plenty of reasons for doing so: to buy your own home, or second home, in an area with sun or ski slopes or golf course.

Or to make a killing as a landlord.

But before you take the plunge, you should know the answers to some basic questions.

For example, Why do you want to buy a property? For your own occasional use as a vacation home? If so, do you intend to rent it out when you are not using it?

Do you want the property purely for investment purposes? If yes, why are you buying abroad instead of at home? What are the prospects for rental income? What about capital growth? And how about inflation?

Do you have an exit plan? When do you think you might sell it, and how would you feel if, at that time, the market soured badly?

Foreign property is inherently riskier than the domestic variety, especially for investment properties. Foreign property is harder and costlier to manage. Currency-rate fluctuations can prove disastrous. In a legal dispute, you may be seriously disadvantaged. Inflation can erode your income.

Airplanes tell the Tale

According to one joke, if you want to be successful in investing in foreign property, park yourself at Dublin airport, wait for the Irish investors and go where they go. These savvy investors are early birds in finding hot spots.

Another wry joke also involves airplanes, the ones taking British investors to a hitherto obscure ski resort or far-away sun-baked island that no one heard of a year or two ago. The plane is full of potential investors but has no tourists and holidaymakers - plenty of future landlords, no tenants.

Law, Rules and Regs..

Property law and related matters, such as inheritance tax, differ from country to country.

And property and financial laws within any country are subject to change.

In countries like America and Switzerland, national laws and regulations can be supplemented by local laws and regulations. And the bylaws of a small locality can make all the difference between success and failure with investment properties: consider buying a rental flat only to later learn that short-term lets are not allowed, or are severely restricted - not by the national government, but by the local township.

...and domicile

If you plan to move abroad to escape the long arm of the British tax authorities, expert legal and tax advice is necessary. Where you live or think you live may differ from where HMRC deems you to live. Residence, ordinary residence, domicile - these are difficult concepts. And as Robert Gaines-Cooper discovered in 2010, the tax man can swoop down and bite you with a surprise decision as if out of the blue.

Investment Locations

Inside a small roadside shrine.

Before the property and buy-to-let boom that began in the mid 1990s, British buyers of foreign property essentially bought in a handful of countries: France, Spain, Portugal, Italy and America.

Most of Europe has now entered the picture, along with the rest of North America (Canada and Mexico), Latin and South America, and more recently, Asia and the Pacific.

Whatever the country, basic information is vital. How stable is its government? How sound is its economy? What is the supply-demand situation for property? How fair and reliable is its legal system?

How much research is enough?

Professional investors work full time at researching locations; amateurs lack the skills as well as the time to devote to research.

But too little research can be plainly obvious: take the case (true story) of an amateur investor who attended a foreign-property trade show in the Midlands. A developer showed her lovely pictures of a block of flats in a foreign country, and she bought a flat from him right there and then. Later, when she visited the property, she realised that she had bought the runt of the litter, a dark and dreary flat that would be the hardest to let and would get the lowest rent in the block.

On the other hand, all the research in the world offers no guarantees. Several British owners of homes in Spain recently lost their property, with little or inadequate compensation, because of planning foulups. This occurred despite their apparently obtaining good title - and legal advice - when they originally bought the property.

Warm, Hot, Getting Even Hotter...Off the Boil.

The unfortunate truth is that by the time most of us hear that a location is hot, it is probably too late. Everybody else has also heard the brilliant news, and a rash of new investors have already pushed prices up. It may still be a good investment, but the best profits will be made by those who were first in.

Right Location, Wrong Property Type

Many British buyers of property in Florida can testify to the dangers of finding the Right Location but buying the Wrong Property Type there.

British holidaymakers in Orlando - and this has happened to more than a few individuals - are often taken aback by prices that seem too good to be true - and for once, this cliche ("if it looks too good to be true, it probably is") does not involve a scam or con.

From a British perspective - where a lot of money usually buys very little house and land - America genuinely represents amazing value. Relatively little money buys lots of house on plots that can run to many acres, swimming pool included.

This is true in economically normal times, when the dollar is worth about $1.50 to the pound. It is dizzyingly true when, as in c.2007-8, the pound rose to more than $2.10.

Here's what can easily happen. A British couple, dazzled by the low prices as well as the nonstop sunshine, is shown round a stunning large private house with swimming pool. The price tag looks like a steal, and tourists are abundant. So they buy. And maybe they get some rental income, but this is a market in which the attractiveness and quality of the property itself is not of paramount importance for the temporary visitors. In this theme park location , tourists spend the day away from their rental property visiting the various attractions, not lounging by their private pool. They mostly dine out, not in. Substitute beach for theme park and a similar scenario applies to Spain.

Tourists' wants and needs in their two-week home are mostly met by a bed and toilet. In these locations, flats - not houses - tend to be the better investment performers. The house-buying investor might have enjoyed better returns buying a two-bed flat in an apartment block.

^^ Back to Top ^^