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Top Considerations When Purchasing a Home Abroad

Owning property abroad can be the perfect way to experience the thrills of another culture without abandoning the coziness of home. And many people aren’t just buying a home abroad for vacation purposes. In the year leading up to June 2011, about 343,000 citizens emigrated from the United Kingdom for 12 months or more.[1] To date, there are an estimated 6.3 million American citizens residing outside of U.S. borders.[2]

Whether someone plans to use their home abroad as an oasis or a home base, it’s important to conduct due diligence before taking the leap into ownership. Making international payments and dealing with foreign exchange rates can make living abroad complicated. Here are four key issues to consider when researching international real estate.

1. Investigate Market Stability

Prospective buyers should consider working with a real estate broker to determine the stability of the local housing market. Some areas to pay particular attention to include:[3]

“There are many countries that withhold property ownership rights from foreigners, particularly with regards to agricultural land.”

— Philip Hodgen, an international tax attorney at Hodgen Law Group, PC

  • Inventory: Are there a lot of properties for sale? A glut of homes may indicate a sluggish local housing market.
  • New construction: Has there been a spike or dip in new home construction? This is a tangible indicator of market growth or contraction.
  • Pace of sales: How quickly are homes selling? If homes are starting to be snapped up more quickly, it’s a sign the market is moving in a positive direction. However, if things look too good to be true, be wary of a potential housing bubble.  

Buyers should also think about market stability on a national scale. “Some important factors to consider are the stability of the nation’s governmental structure, and the strength of their financial system,” says Cliff Perotti, director of the International Services Division at Frank Howard Allen, an independent luxury real estate company based in San Francisco.

The state of a country’s housing market and economy at large not only impact a property’s potential as an international investment, but they can also have a significant impact on the value of that country’s currency. Fluctuations between a domestic and foreign currency can impact everything from the cost to convert funds to an individual’s purchasing power in the other country. Working with a team of specialized currency advisors can help individuals plan for contingencies related to fluctuations in a currency’s value.

2. Evaluate Ownership Rights

Federal governments in countries like the U.S., Canada and the U.K. are fairly lenient when it comes to allowing foreigners to purchase real estate. However, buyers should note that many nations — including Thailand, Croatia and Poland — do impose ownership restrictions on non-citizens.

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“There are many countries that withhold property ownership rights from foreigners, particularly with regards to agricultural land,” says Philip Hodgen, an international tax attorney at Pasadena, Calif.-based Hodgen Law Group, PC, a law firm specializing in international tax laws and real estate. “Buyers should partner with a professional to devote a part of the research process to looking into these restrictions, in order to avoid any unpleasant surprises when it comes time to close the deal.”

3. Check Out Demand for Rental Properties

For buyers looking to earn income by leasing out their home abroad, evaluating demand for rental properties is an essential part of the research process, Perotti says.

Buyers can gauge demand for rental properties by looking at vacancy rates, a figure that compares the number of renters in a given area to the amount of available rental properties. Low vacancy rates are indicative of strong rental sales, and more importantly, they signify a good opportunity for buyers to lease out properties. To learn about the vacancy rates for a given area, buyers can consult a local property management company or refer to data from the country’s census bureau.

4. Consider the Logistics of Making and Receiving Payments

Once a home has been chosen, it’s crucial that the homebuyers consider how they will submit regular mortgage payments. Working with an online foreign exchange service can help homeowners submit their payments abroad while minimizing fees and markups that are associated with similar services that banks provide. An online foreign exchange service can also help homeowners collect international payments from people who rent out their property from time to time. 

Researching and gaining knowledge of the market before buying a home abroad can help minimize potential risks. Ultimately, that means a more sound property investment, so buyers can focus on enjoying their time abroad.

[1]“Migration Statistics Quarterly Report – February 2012,” 2012, The Office for National Statistics (U.K.)

[2]“Bureau of Consular Affairs’ Fact Sheet,” 2011, United States Department of State

[3]“Housing Market Indicators,” 2012, U.S. Federal Housing Finance Agency

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