Foreign affairs - Mortgage Solutions
Foreign affairsMortgage Solutions, UK - Mar 25, 2008In the past decade, an increasing number of Britons have turned their attentions overseas and have invested in property, not only in popular European ... |
Foreign affairs - Mortgage Solutions Although France is not far behind (27%), with Italy and Portugal next in line. As in the UK, the best approach is to use a reputable local architect and builder to oversee such projects.Many people also buy new build properties off-plan. Banks in Spain will not lend on property without an Escritura, so it pays for clients to use the services of a professional local lawyer. Building permits are granted at the local town hall. But most of us in the UK do not understand the language or taxes of a foreign market. Buying off-plan differs from buying an existing property and there are a number of factors the client will need to consider. Even the Baltic States, which have seen house prices soar by 200% between 2000 and 2006, saw early-year price rises wiped out in 2007, especially in Estonia and Latvia.Potential opportunitiesHowever, as with all housing markets, there are opportunities as well as risks. Fines for unregulated building work have risen to a level that acts as a serious deterrent. For example, a common trap has been for cash buyers not to obtain a full title deed, or Escritura, and then discover they do not own quite as much land as they thought they did. Halifax's latest monthly survey shows that prices fell across the UK again in February, taking the annual rate of house price inflation down from 4.5% to 4.3%. Historically, the Spanish have paid scant regard to planning regulations, but this has changed. In Cyprus, for example, the maximum loan-to-value is usually between 60% and 80%, whereas in Bulgaria, Turkey and Switzerland it is 75%. Jacobides Professor of Strategic and International Management London Business School Mortgage Funding – achallenging market! Many thousands of investors bitten by the buy-to-let bug in the past 10 years have decided to cast their nets further and look for better returns and stronger capital growth overseas. More recently, Eastern block countries such as Poland have also started to rise in popularity.The reason for this foreign exodus happened well before the current situation of stagnating UK house prices and a slowing economy. Once a property has been purchased, the client might want to make alterations, such as building a swimming pool – 75% of potential Spanish property buyers consider swimming pools an essential extra. The client will only own the property once it has been completed. The greater availability and reduced cost of short-haul flights has also fuelled interest in foreign property ownership. The ideal solution for most clients is to have legal representation in the country in which they are purchasing property, but finding a reputable solicitor can be a problem when they have nothing to go on.What sort of legal problems can arise? There are also issues such as local tax laws and CGT to be considered.The key issue for financial advisers is that owning a property abroad remains an ambition for thousands of UK homeowners and therefore represents a potentially lucrative market. This has been a particular problem in the Valencia region.The Escritura legally defines the bounds of a property and the size of buildings on it, and specifies the sale value, which governs the amount of CGT to be paid when the property is eventually sold.
