Navigating the property market can sometimes be tricky, but things become even more complicated if you’re investing in property abroad.
According to an article by the Buy Association, overseas investors own around £90.7bn of property in England and Wales. High returns, property diversification, and tax efficiency make investing in overseas property attractive for many.
However, investing in property abroad isn’t always straightforward.
Overseas investors can find themselves up against numerous challenges, so if you’re considering diversifying your property portfolio overseas, it’s essential to do your research and ensure you’re well-informed before taking the plunge.
This article explores some of the most important factors to consider when investing in overseas property.
Factors to consider before investing in property abroad
Diversifying overseas offers property investors a wealth of new and exciting opportunities.
However, the international property market is complex, and the potential benefits of investing overseas can quickly be negated if you don’t do your due diligence.
From understanding tax regulations to knowing which areas and property types are in demand, doing your research can mean the difference between a profitable investment and a costly mistake.
Let’s explore some key factors every savvy investor should consider before investing in property overseas.
Every country has its own rules surrounding tax, and it’s important to have a sound understanding of the rules in your home country and where you plan to invest. Ignoring tax rules and regulations could land you in trouble, and result in hefty penalties. For instance, those investing in property in the UK need to understand Stamp Duty Land Tax, Capital Gains Tax, and Income Tax on rental earnings.
Exchange rates and international currencies
Exchange rates are constantly in flux, and any changes can significantly impact your investment’s value and returns. Make sure you’ve got your finger on the pulse when it comes to exchange rates, and avoid investing in property in countries with a volatile currency.
Each country has unique legal requirements regarding property ownership and landlord responsibilities, covering aspects like building codes, tenant rights, and health and safety regulations. It’s important to know these requirements inside out before investing in property overseas to avoid any unpleasant surprises, complications, or issues later down the line. Failure to comply with relevant laws can lead to penalties or even prosecution.
It is typically more challenging to get a mortgage as a foreign investor. Many lenders have a list of countries that they will not lend to, so it’s useful to check that the country you reside in is not on any such list before you invest. Several factors may make it easier for you to obtain finance in a foreign country. For example, if you wish to invest in property in the UK from overseas, these include already owning a UK property, being an expat, having a UK bank account or passport, or working for a UK-based company may help you to access finance. It’s also important to note that financing for overseas investors may be subject to higher interest rates.
Location and property type
Investing in the right property and location is the best thing you can do to ensure your investment is successful and profitable. When choosing where to invest, look for up-and-coming areas and emerging markets currently experiencing economic growth. Choosing the right overseas investment property requires excellent local area knowledge, including neighbourhood safety, amenities, public transport, and average property appreciation and rental yields. As well as choosing an appealing location, selecting the right property type will also help maximise your returns. Investment properties don’t always look the same in real life as they do in the brochures, so if you can do so, view the property in person before buying to ensure that it meets your expectations.
Connect with property experts
If you’re considering investing in UK property from overseas, you’ll benefit from partnering with a team of experts who can provide local insights, help with your property search, and advise on legal compliance and tax rules.
At The Mistora Group, we specialise in helping overseas investors find and secure attractive property investment opportunities in the UK.