Satisfied you’ve done all your sums before calling the estate agent? To be doubly sure, read our list of typical costs that come with property ownership, some of which often get overlooked. Maybe not all these costs of buying abroad will affect you, but checking now could save you the disapppointment of withdrawing an offer if you can’t afford to complete.
It won’t come as a surprise that the costs of buying abroad won’t be just the agreed purchase price. Wherever you are in the world, there will be additional buying costs to pay too. You need to factor these into your overall budget. Typically, these costs of buying abroad include transfer tax (levied on all resale purchases), agent’s commission, notary and legal fees. There are other small disbursements such as stamp duty and land registration fees (often included in the notary’s bill).
If buying a new property, transfer tax won’t be levied but you’ll pay VAT instead. There will also be extra fees to pay if buying with a mortgage. A guide to total buying costs is usually given as a percentage of the purchase price.
One of the biggest potential costs is also one of the least understood – currency risk. This is where you make an offer and sign a contract, then discover that the pound has fallen in value before you have to pay the balance in euros or dollars. You can have to find thousands more at the last minute. However, the good news is that it’s easily solved. As soon as you make the firm offer, you should be taking out a forward contract. Our currency partner Smart Currency Exchange has a free guide for you to download: The Property Buyer’s Guide to Currency. We recommend you read it as soon as possible.
Don’t forget about council tax! While typical rates are cheaper in most of Europe compared to the UK, it still needs paying each year. In some countries, council tax is broken down into different elements – eg. one for rubbish, one of roads, which are payable at different times of the year. Your estate agent should be able to give an idea of a property’s annual council tax bill.
As in the UK, your energy bills will fluctuate depending on the time of year. Hot summers usually mean air conditioning systems being on a lot, which equates to high electricity bills. And a private pool with a pump and filter system going much of the day will bump up your bills in the summer too. Older homes may not be on mains gas, which is one less standing order to pay. Energy and telecoms costs can be unusually high in some countries, depending on supply, so do your research.
If you buy a property that is part of a development with shared facilities, such as communal areas, gardens, swimming pools, gated entry, gym and other sports facilities, you’ll need to contribute towards maintenance by paying community fees, a type of service charge. These are usually payable monthly and will vary depending on your development’s size, the density of property there and the amount of facilities. Again, find out this cost before committing to a purchase.
As in the UK, you will need to insure your property, both the building and its contents. In an apartment block within a development, check whether buildings insurance is included in your community fees. If you are letting your property, make sure you have suitable cover for public liability and accidental damage.
Don’t lose your rental profits to suddenly changing exchange rates. Find out how to lock in one rate in the free Property Buyer’s Guide to Currency.
Furniture and refurbs
If you choose a partly or unfurnished property, you’ll need to keep some funds back for furniture. You may pick somewhere that needs a new kitchen or bathroom, which again will require careful budgeting.
Always put aside money for general maintenance. This could include getting your air conditioning system serviced each year, painting the sun-beaten exterior walls, buying new beach towels or replacing the furniture on the terrace. And if you have a swimming pool, chemicals and general upkeep should be considered.
Holiday lets can make you money, but come with overheads too. You may choose for a local agency to handle everything, from advertising and bookings to changeovers. Or pay them less commission and use them simply to manage changeovers. Typically, you’ll need some form of licence from the local town hall to do rentals, which will mean you may need to spend money bringing your property up to the required health and safety standards. You must then consider any tax liabilities from your rental income.
Even if you are still resident in the UK, you may be required to file an annual tax return and pay a so-called non-resident imputed income tax in the country of your overseas home. Ask your local lawyer about this – many will offer to do this for you each year.
Making a will
It is highly advisable to make a local will in the country of your overseas home, which for around €300-€450 can be done through your lawyer. Not only will this will be exclusive to your assets local to that country but it will protect your property from local forced heirship laws, which apply in countries such as Spain, France, Portugal and Cyprus.
European banks usually charge annual fees and fees for certain transactions for non-resident accounts – these can add up to €50-€100 a year. Ask around locally for the best value bank account if you’re not moving abroad.
Another way to save a few pounds – or a few thousand! – is to improve your haggling style. Read our guide, How to Negotiate Abroad. It’s written by a licensed estate agent and is packed with insider tips.