Four things to consider when investing in property abroad
Following the UK’s decision to leave the European Union earlier this year, more property investors than ever before are abandoning domestic markets and expanding their search overseas. While Brits are looking to escape the financial uncertainty, estate agents in the UK have been swamped with calls from Chinese, Middle Eastern and European buyers looking for a bargain.
However, when searching for property overseas, it’s important to consider the various benefits and risks associated with such investments. Here, we’ve compiled some of the things that should come into consideration:
Are there any perks to investing in particular real estate markets?
With real estate markets all over the world to potentially invest in, it is worth looking closely at the perks you could receive for investing in particular countries. One of the benefits of investing in approved real estate projects is the opportunity to gain greater mobility in some countries.
For example, the Caribbean island of Grenada has a successful citizenship by investment programme which is designed to support the growth of the country’s emerging economy. Grenada allows individuals to hold dual nationality, and those who are granted citizenship through investment can extend this to their spouses, dependent children and dependent parents.
Having dual citizenship can also be beneficial to one’s business interests. Visa-free travel to a number of nations means citizenship by investment is an effective and efficient way of accessing new markets.
What is your tax liability as an investor?
Tax circumstances are different for everyone, and this is never clearer than in the ever-changing property market. Whichever country you invest in will have its own unique system of taxation, and it is important to bear it in mind before you make a decision.
Foreign tax laws could require you to pay a title transfer, stamp duty or inheritance tax at the moment you invest. You may also need to pay land tax or business rates if you intend to let your property for commercial usage. A professional business rates company like Gerald Eve can help you with deciphering international business rates law.
How significant will the language barrier be?
Even if you never plan to move into your property investment, you will still have to communicate with local foreign agents and vendors in order to make your purchase. Miscommunication can delay the completion of the investment and can have a negative impact on total cost. Not only language, but local laws and customs can become barriers to a successful investment deal.
If you are not fluent in a second language, it is worth enlisting the help of a business translator to read over any legal papers or contracts before you sign them.
How financially stable is the country you’re investing in?
Every country has economic and political risks and these need to be carefully considered during the foreign investment decision making process. Those who invested in Greece before the debt crisis found out the hard way – house prices in the country dropped by 50% on average.
A nation with a stronger economy and stable finances should provide a safer investment than those with less developed economies and other factors such as social unrest.
Following the news will be enough to show you which countries you need to avoid, and online sources like The Global Economy and the Index of Economic Freedom can tell you about the stability of specific countries’ economies and political systems.