Pitfalls Of Buying Overseas Property For Expats

Expats are finding buying a home increasing difficult the world over as stricter lending rules and rising taxes restrict their opportunities.

Many governments see expat property owners as a cash cow because they can tax property easier than other assets because moving bricks and mortar is harder than hiding other assets.

Expats also fall into a legal hole as laws about owning property can vary considerably between countries and lead to unexpected pitfalls – like the title deed scandals in Spain and Cyprus.

In both countries, unscrupulous developers sold already mortgaged properties and ran off with the money leaving expats caught in a legal mire over who owned the title to their homes.

Overseas property owners are said to be fleeing the European market because freedom of movement rules do not extend as freely to expat mortgage lending.

Worries over expat debts to banks have wrapped applying for home loans in swathes of red tape that have almost stopped the market dead.

Not only is proving affordability called into question, but lenders have to monitor exchange rates if the loan is made in Sterling but paid in Euros. If the rates hit certain levels, a warning bell sounds and the deal has to be reviewed.

Other points to consider include legal and language barriers. Buyers need lawyers who are at arm’s length from anyone else involved in the sale, such as brokers, property agents and developers. Every document needs careful translating and explanation by an expert.

Tax is also a major issue for expats seeking to buy property.

Tax pitfalls

Overseas residents owning property in the UK have a raft of taxes to consider, from stamp duty on purchase, income tax on rental profits, capital gains tax on growth in value and inheritance tax on their estates.

Ownership through a company also triggers annual payments on top of the rest of the taxes due.

Add to this taxes in the place an expat lives that may be due on homes or investments and what seems a simple transaction can become a nightmare.

Independent, professional advice from lawyers, tax experts and financial consultants at places at both ends of the transaction are vital.

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