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Don’t Get Burned Buying A Foreign Property

Holiday homeOne sign that the UK economy is recovering is the number of Britons who are dreaming of owning a place in the sun again.

The British were crazy for foreign property before the financial crisis and, after a few years in remission, the madness has returned in force.

Overseas mortgage specialist Conti recently reported that enquiries from dreamy British buyers doubled in the first three months of this year.

My inbox is full of emails from property companies ramping up their latest investment opportunities in Spain, Florida, Italy, Brazil, Turkey, South Africa, you name it.

All of which makes me nervous.

Pound Rises, Property Falls

It is certainly fun to be a British buyer abroad again.

One year ago, with the pound worth less than €1.17, a €250,000 apartment in Spain would have cost you £213,675, according to figures from currency transfer service Moneycorp. 

Today, with the pound topping €1.23, you would pay £203,252. That is £10,423 less.

Sterling now travels even further in the US.

With the pound up 12% in a year to around $1.69, the cost of a $350,000 condo in Florida has fallen from £229,508 to £208,995 over the same period. 

That would save a British buyer more than £20,513.

Hello, Florida!

Discounts To Be Had

That’s not the only reason Britons are looking to buy abroad again. Holiday home prices have fallen by anything up to 25% in the US and 40% in Spain.

There are tentative signs that prices have bottomed out. Buyers will be keen to grab a bargain before they start rising again.

Better still, as UK house prices rebound, especially in booming London and the South East, many Brits have more spare equity in their own home to fund a second one.

Beware The Bulldozers

All of which means fun in the sun, unless you get seriously burned. And plenty of Britons have, especially in Spain.

I recently interviewed British pensioners who had spent their life savings on a Spanish home in Andalusia and Almeria, only to be told later it was built without planning permission.

Some saw their homes bulldozed before their very eyes, without compensation. Others are still fighting endless legal battles to save their properties, a decade on.

That’s no way to spend your final years.

Britons who own seafront properties in the Algarve, Portugal, have also been threatened by a ‘land grab’.

Buyer Beware

British buyers must slap on plenty of protection, to avoid getting scorched. 

That means sticking to established developments in the the Costas, Balearics and Canaries or Barcelona, and shunning dusty building sites in the deserts of Murcia. 

Check local facilities such as shops and transport carefully. Make sure the infrastructure is already in place, because many half-built Spanish developments in more remote areas may never get finished. 

Choose your property carefully and be ready to haggle. And don’t be hassled into a panic buy by salesmen predicting a return to the boom era.

Touched By The Sun

You must also do your sums carefully, because transaction charges and taxes can add another 10% to the cost of your purchase, pushing you over your budget.

Most important of all, take legal advice, from an independent specialist who doesn’t have any ties to your developer or vendor.

As we head for another rainy bank holiday, you can be forgiven for spending the day indoors browsing foreign property websites. But if you’re tempted to jump onto the next plane, make sure your brain isn’t scrambled by the sun.

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