Guide to buying property abroad

Buying property abroad is a substantial, long-term investment. Therefore, it is imperative to research various overseas real estate markets before deciding upon the one that you want to invest in, because there is always an opportunity cost to allocating substantial resources to one particular investment. Purchasing an oceanfront property on an island might seem like a great idea, especially if you are looking for a holiday home, but if the market is weak, you might find it difficult to sell that property later on and get a good return on your investment.

Deciding where to invest in real estate will depend on your personal financial situation and ambitions. That said, there are always some hotspots for international property investment. In an article titled “Why The Best Investment In 2016 Might Be Global Real Estate” on Forbes.com, Kenneth Repoza reports that “London, Paris, New York, San Francisco, Tokyo and Sydney are the main targets for direct cross-border real estate acquisitions over the next 12 months.” As 2017 unfolds, emerging markets have seen a lot of interest from international investors. Eastern European economies like Poland, Latvia and Estonia have attracted foreign capital and are a just a few of the interesting options for real estate as well. (You will need to check your local tax office website for more details.)

As you do your research into where to buy property abroad, one of the primary factors affecting the viability of your investment will be the exchange rate. Aside from doing a quick currency conversion, you may want to review the current economic standing of a foreign currency against historical rate charts.

Keep in mind that currencies will fluctuate, sometimes quite dramatically, over time. And sometimes currency exchange rates will change rapidly over a short period of time.

After the Brexit vote in the U.K., for example, the pound’s value fell 10% against the USD in one day. On Telegraph.co.uk, Rhiannon Bury reports that in the three months following the Brexit vote, 78% of commercial property sales were paid for by foreign investors swooping in on a bargain.

In a similar way, President Trump’s policies against Mexico caused the peso to fall in value dramatically, however, real estate in tourist areas continues to attract foreign investors looking for a good deal.

Aussie real estate is another hot target for foreign investors looking to profit from exchange rate fluctuations. Because of the international demand for housing in major metropolitan areas, assets in capital cities like London, Sydney and New York may be protected to some degree from declines due to demand fostered by currency fluctuations.

When purchasing real estate in another country, it could be difficult to find the appropriate financing option, especially since some countries might not have any financing options for foreign buyers at all. In some countries, banks cannot take a foreign asset as a security for the loan, so you may not be able to get a standard mortgage from your domestic bank the way you would for a local purchase. Still other international regulations may prohibit banks from even initiating a conversation to a client about a mortgage if the client is based overseas–even if you’re a citizen of the country in which you want to buy. So how can you get a mortgage for an overseas property purchase?

While traditional bank financing might not be available for overseas assets like it is in your home country, developer financing may be available when there aren’t any other options for foreign investors.

Other payment methods might include using the funds in your retirement account or pulling equity from your primary residence in your home country. You may qualify for business or personal loans that you can use to pay for your down payment overseas. Certain banks, like HSBC, offer mortgages for international borrowers, if you can maintain a minimum bank balance at a designated threshold.

Australia
As of April 2016, two major home lenders in Australia have opted out of offering mortgages for non-residents. Westpac and the Commonwealth Bank no longer accept mortgage applications from foreigners. Other banks have also reviewed foreign lending policies and, in some cases, reduced loan sizes and borrowing limits.

United Kingdom

There are a number of things to consider if interested in purchasing a property in the UK as a foreigner. For example, Australia’s Corporations Act creates barriers for Australians looking to purchase in the U.K. which can be surprisingly difficult to overcome. Some lenders base their decision on visas, including spouse visas. Not having credit in the U.K. can also hinder the process.

United States of America

In the United States of America, getting a mortgage can be influenced by: