Buying property abroad – a guide

Buying property abroad continues to be popular with Britons. The Alliance of International Property Owners estimates that 1.5 million of us own property overseas – be it a permanent residence, holiday home or timeshare – and each year about 30,000 people join their ranks.

Whether you are buying a property abroad to rent out or starting a new life overseas, there are several important factors to consider when it comes to overseas property investment, not least in the wake of Brexit if your chosen destination is within the European Union.  

In addition to where and why you are looking to invest, you will need to research the most cost-effective way of financing your purchase – whether you are a cash buyer or you require a mortgage – plus any tax implications, restrictions or other risks that investing in property abroad may hold. So if you’re thinking about buying property abroad, this article should help you to get started with securing your place in the sun.

Why buy a property abroad?

These are some of the main reasons people consider buying a house abroad:

Relocation overseas

Whether you are dreaming of retiring somewhere sunnier, moving abroad for work or simply starting a new chapter overseas, buying a home in your chosen country can help you make the most of a more permanent move abroad. 

As a holiday property

Many Brits have claimed a piece of their favourite holiday destination to enjoy time after time with family and friends, with coastal Spain being one of the most popular choices for people to buy a holiday home abroad.

As a rental business

With many sought-after destinations such as France, Italy and Portugal offering more cost-effective properties with higher rental yields than the UK, plus warmer weather and more reliable summers, buying property abroad to rent out can provide attractive returns.

As an investment

Buying a property abroad can be a lucrative investment, especially if you’re thinking long-term. New market hotspots are emerging all the time and may offer a bargain with great returns down the line, while established markets in popular tourist areas are likely to be a safer bet for overseas property investment. 

Buying a property abroad could be a good investment for the long term, especially if foreign property is more affordable than at home. However, before making such decisions, it’s best to go on a scouting trip to check out any property and the surrounding area. Unless you have been a regular visitor to the region you are considering, take your time to look around. And when you are organising your viewing trip, prepare questions to ask when you assess the various properties. 

Where is the best place to buy a property abroad?

The best place to buy a property abroad will depend on your individual needs. You need to ask if the destination is right for you. 

Are you after a slower pace of life? Do you need a family-friendly location? Perhaps you’re looking for specific amenities such as a swimming pool, restaurants or entertainment. You should also consider when you think you will use your property, as some holiday hotspots shut down in the off season. 

According to the property portal A Place in the Sun, Spain is the most sought-after location for Brits buying abroad, with France, Portugal, Cyprus and Greece completing the top five. Considering its popularity with UK expats, Europe is a great place to start when looking for cheap property abroad.

There is also an appetite for heading further overseas. Italy, the United States, Turkey, Bulgaria and Malta rounded off the top 10 places Brits are buying in outside the UK.

How much does buying property abroad cost?

Cost is also often the key factor when investing in property abroad. In fact, property prices outside the UK are often lower, which makes buying property abroad an appealing investment. When looking at the most popular European destinations, Greece and Cyprus can offer some of the cheapest options. Further afield, Turkey offers very competitive prices, with the average price for a two-bed flat as low as £47,000.

Do you pay Stamp Duty if you buy a property abroad?

If you are buying an additional property – and therefore end up owning two properties – you will have to pay extra Stamp Duty, even if the property is abroad. 

If owning more than one property is only temporary, you will still have to pay the extra rate. However, it does depend on the value of the current property that you own, so again it is worth doing your research. Bear in mind that Stamp Duty will apply even if you own a share in a property. 

You also need to consider Capital Gains Tax on overseas property. Capital Gains Tax is paid when a UK resident ‘disposes of’ an overseas property and makes a gain on the sale. 

How to calculate Capital Gains Tax on overseas property

To calculate your total taxable gains you need to work out the gain for each asset that you’ve disposed of in the tax year. Then add together the gains from each asset and deduct any allowable losses. 

There are specific rules if you’re a UK resident but not domiciled. Refer to the government website on Capital Gains Tax for a full calculation.

Has buying property abroad changed since Brexit? 

Since Brexit was finalised in 2021, there have been some changes to what you may have to consider if you are buying property abroad as a British citizen. These largely affect those who are looking to purchase property in Europe. 

Ultimately, you still have the right to buy property in Europe after Brexit, and in most cases there are also no additional costs – purchase tax and property registry fees are usually the same, regardless of your nationality. However, if you are planning to rent your property out, you may have to pay a higher rate of tax on this income as a non-EU resident. 

For example, in Spain, EU residents pay 19 per cent on income (e.g rental), whereas non-EU residents (including British nationals) pay 24 per cent. 

It is also important to note that the GBP-EUR exchange rate did drop following the Brexit vote in 2016, so you may also find that property in Europe is slightly more expensive than before Brexit.

Will your property be a holiday home or a permanent residence?

You should also consider the purpose of your overseas property investment  – whether you plan to have this as a holiday home or a permanent residence – as the rules have changed since Brexit.

• Holiday home You will need to take into account the new rules around the Schengen visa, which allows the holder to enter, freely move around and leave the 27 European countries that have abolished their internal borders. This now means that Brits can only spend 90 days of a rolling 180-day period inside the EU. If you’re purchasing a property for the holidays, ensure that this would suit your needs.
• Permanent residence If you’re planning to move permanently to a country in the EU, you will now need to get a visa. The rules for this change by country, but in general retiring it is a little easier than moving to work in the EU.

Top tip: Golden visas

If you are looking to purchase a property abroad, you may be able to qualify for a ‘golden visa’. This is a resident visa that is granted in return for large investments in that country, such as property purchase. EU countries that offer this option include Spain, Greece and Malta. 

How do I finance an overseas property purchase?

If you are buying a property overseas,  there are a number of ways you might finance it. 

For example, if you have a pension lump sum or perhaps have savings to invest, you may be able to buy the property outright. 

Alternatively, you might want to borrow part of the cost with a mortgage, so consider the costs and benefits of taking out a mortgage for overseas property in the UK or with an overseas provider. 

Taking out a mortgage for overseas property

Unless you are a cash buyer, you will probably need to find the best mortgage option for your needs when buying a property abroad. 

As many UK high-street banks offer an international mortgage service, you might not need to stray much further than your current bank, and you may appreciate using a familiar provider. However, you would be dealing with the foreign arm of the bank and, because they often provide mortgages only in countries where they have offices, your options may be somewhat limited, especially if you are looking further afield than Europe.

Another popular option is to use a specialist overseas mortgage broker, who will typically be able to provide personalised information, including a range of lawyers and real estate agents in your chosen country. Compared with UK providers, mortgage brokers in Europe often offer much better rates, so borrowing abroad could save you money. However, it’s also important to factor in exchange rate fluctuations, which may affect your repayments. Speaking to a currency specialist to arrange some beneficial money transfer options can help to mitigate the risk involved.

Transferring money overseas

However you choose to fund your property purchase, you are likely to need to transfer large sums of money overseas. For this, an international payments expert can help. Telegraph Media Group International Money Transfers is provided by Moneycorp, an international payments expert with more than 40 years’ experience. Moneycorp’s award-winning customer care team is based in the UK and can offer you help and guidance on making an international payment to buy a property. 

Securing an exchange rate

Timing is crucial when it comes to getting the best exchange rate. Foreign exchange markets are unpredictable, which is why being able to control the rate you receive can make your money go much further. You can secure an exchange rate and transfer later with a forward contract*, locking in a rate for up to two years. 

Offering knowledge and guidance on buying a retirement villa, a family home in the sun or a seaside apartment for when you need to escape the rat race, Moneycorp can help to make your overseas property investment dream a reality. 

Read more:

• What is the cheapest way to send money abroad?
• How to send money to Dubai
• What is a SWIFT code?
• What is an IBAN?

* A forward contract may require a deposit

The above article was created for Telegraph Financial Solutions, a member of The Telegraph Media Group. For more information on Telegraph Financial Solutions click here.

Be aware of currency risk. None of the information contained in this article constitutes, nor should be construed as financial advice. Moneycorp is a trading name of TTT Moneycorp Limited, which is authorised by the Financial Conduct Authority under the Payment Service Regulations 2017 (Reference number 308919) for the provision of payment services. All customer funds are safeguarded in segregated client bank accounts. Date of approval 17/05/2023.

Information correct at date of publication.