Paul Owen's Blog

Buy overseas property safely. Buyers too often subject themselves to much too high a risk, something you can avoid and should avoid. This blog will focus on such avoidance, or reduction, of risk.

5 top tips: Buy overseas safely

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Friday, September 11, 2009

Independent lawyer

No matter what anybody tells you, no matter how easy it all seems and no matter how lovely the agent seems, ALWAYS use an independent lawyer to represent you throughout the purchase of your property overseas.

It is the lawyer's job to protect you and inform you.

You will need to pay the lawyer a fee - accept that as part of your purchase costs. This is not an area in which to keep costs down.

The definition of ‘independent' is that the lawyer represents you and only you.

Do the numbers

Make sure you know your budget before you start looking at properties - this should include at least a provisional mortgage offer if you're borrowing money.

Don't then be tempted to buy more properties than you can afford (particularly on off-plan properties) hoping to sell the extra properties before completion unless you fully understand the risks as well as the rewards (see point 5).

If borrowing money, your repayments will stretch over several years, years in which lending criteria and borrowing costs may change. Discuss the long term repayment with a financial specialist before proceeding.

Beware exchange rate movements

The rates do not need to move substantially to affect the value of your purchase. When you start looking, £100,000 may buy you a certain property - a 10% drop in the value of the £ against the Euro, for example, may then put that property out of your budget. If you've already signed contracts to buy, this could cause you a problem. Speak to specialists in this area and secure your rate of exchange early.

The rate fluctuations will also affect the costs of mortgages (if you raise the mortgage overseas and earn your income at home). Again, speak to a foreign exchange specialist to highlight the risks and to take appropriate action.

Use professional agents and developers

There are few, if any, guarantees when buying property, at home or overseas. Using an independent lawyer (see point 1) significantly reduces the risks you take on an overseas property purchase and employing a professional agent or buying from a professional developer will also help you.

Ask lots of questions. 3 year old children are known for asking lots of questions (why? why? why?) and you should follow their lead when talking to agents about a purchase. Initially, focus questions on the company itself, not the properties for sale. Dig around for details on the founders of the company and the track record of the company. Ask for client testimonials (real ones) and make sure you find out in detail exactly what service they offer. Don't just take their word for it - ask for details on their service in writing, preferably in the form of some type of ‘Terms of Business'.

Remember the reward : risk ratio

If you are buying property overseas as an investment (as many people have done in recent years), you need to bear in mind that big returns may come with significant risks. Be careful to assess the possible downsides to an investment property as well as the enticing investment numbers that could be achieved if all goes to plan.

If you follow these tips, there is no reason why you'll be taking any more risk buying overseas than you do at home.

Good time to buy?

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Monday, July 06, 2009

Reader, I'm not trying to sell you anything.

As a non-profit organisation set up to improve standards of professionalism in our market, the AIPP does not sell property. Our role as far as the consumer is concerned is to provide genuinely independent advice on buying overseas safely. We'll also make clear the benefits of buying with an AIPP Member.

Now you know our position, back to today's question: is it a good time to buy property overseas?

Any agent or developer will of course answer yes. Our answer cannot be so simple. In fact, we will never advise that you should buy property overseas. Our advice (and our raison d'etre) is that if you do wish to buy overseas then do it properly to protect yourself (or at the very least reduce your exposure to risks).

Whether or not it's a good time depends, of course, on your own position. However, let's put a simple fact on the table. The property market has, in just about every country, seen anything from a correction to a downturn to a full-blown slump - whatever they've experienced, there are no signs yet that prices in any of the affected countries have started to increase.

At some stage, prices will rise but none of us will know when that is until it has come and gone.

Common sense dictates that it's better to buy when prices are going down than when they're going up - buyers can drive much better deals at such times. Many stock market investors will be happy if they're within 20% of calling the bottom of the market. When you bear in mind that property is (or should be) a medium to long-term investment (if indeed it's an investment at all), then buying within 20% of the bottom of the market should mean you get a pretty good deal. Particularly if market conditions have allowed you to bag a bargain.

Of course, many people are not buying an overseas property as an investment. It's been one of the less edifying aspects of our market in recent years that every buyer has put themselves in the category of an investor (and many agents sold themselves as ‘investment advisers' which was complete nonsense). I'll cover this aspect of our market another day.

What many people have been looking for (and still are) is a great holiday home or a home in which to spend a relaxed, happy retirement overseas. If you're planning either of these (or if you are one of the proper investors looking for a return on your money and nothing else), a market of falling prices is one that should interest you.

Whether you buy now or later, of course, depends on your circumstances. All we advise is: do it properly and protect your purchase in the same way as you do when buying at home.

In my next blog, I'll look at our 5 top tips for buying overseas safely.

Paul Owen

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5 top tips: Buy overseas safely

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