Expats buy property abroad for two primary reasons – the first being to put down roots in their new home country if they intend to stay for the long term. The second being to invest in property abroad, either for purely financial reasons or to have a second home that will appreciate in value, which can also be enjoyed during holidays. Whatever your motivation for buying, it’s important to consider these five factors.
1. Do your property homework
Research is at the basis of all sound property purchases. Whether you are buying to invest or buying to live it’s important to assess if house prices are climbing in the area in which you are buying or falling. Property prices tend to work in cycles and it makes sound financial sense to buy your property when it’s towards the bottom of a cycle rather than at an inflated peak.
2. Consider the inheritance tax rules
When you invest abroad, it’s important you research the rules around inheritance tax in the country in which you are buying. Discuss the matter with a solicitor in the country, so you can assess the best financial route to ensure your property is passed on to your loved ones.
3. Understand Capital Gains Tax
Capital Gains Tax varies from country to country. Some countries allow you to pay just one set of Capital Gains Tax when you sell your property, others can tax you both in your home and your new country if you profit from selling your property.
4. Assess global trends
If you are planning to purchase property as an investment, it’s crucial you research and assess global property trends. There are numerous reports where you can access this information. The latest Global Real Estate Report released by investment group IP Global shows that European cities top the list as the most popular property investment cities for South African investors looking to make strong returns.
The report looked at cities across the globe and measures their investment appeal by looking at affordability, economic stability and the potential rate of return amongst other factors that make any location attractive to foreign investors. According to the report, the top 10 cities to invest in property are:
- London, UK
- Manchester, UK
- Birmingham, UK
- Liverpool, UK
- Berlin, Germany
- Chicago, USA
- Vienna, Austria
- Hamburg, Germany
- Frankfurt, Germany
- Dusseldorf, Germany
5. Be careful with your money
Another factor that will greatly influence your investment in a property is how you transfer your funds to pay for it. The exchange rate can play a huge role in how much your property actually costs you.
Purchasing a property can take a good few months, and in this time exchange rates can fluctuate substantially – especially if you are transferring your money from a country like South Africa where market volatility remains high. If you want financial stability for your purchase, it can make sense to consider locking in an exchange rate to remove the risk of currency fluctuations.
For more information about foreign exchange, contact FinGlobal. As a foreign exchange intermediary approved by the South African Reserve Bank, we can offer you complete peace of mind, excellent exchange rates, low fees, unrivalled personal service and secure and compliant processing.