UK Versus Overseas
Sceptical that the UK is the best place to invest at the moment? Read our article on 'Doom & Gloom' and then reflect on the following limitations of the overseas property investment market:
"No Exit" for overseas investors:
In countries where there's ample building land, cheap labour and few planning restrictions, developers do what they do best - develop! So when you come to sell your apartment - and you realise that low wages are going to price you out of the local market - you'll be looking for another investor to sell it to, only all those other investors will already have their pick of the latest new-build sites. Why would they want your less-than-pristine one instead?
Rental guarantees = fools gold:
If you're offered a rental guarantee on an overseas site - stop and wonder why that might be. Could it be that local rents won't sustain the yield you've been promised and there's a nasty shock further down the road? Or worse still, how can you have confidence that your seller won't get bored of paying out those guaranteers and decide to liquidate the company and walk away - leaving you to pick up the bill?
Maintenance and management:
Managing a property overseas - even through a letting agent - is a whole new ball-game, and you can't guarantee you'll be able to do it all remotely - for example, some countries, a landlord is required to turn up in person to enforce an eviction order. Be prepared for a hefty phone bill in the best case scenario - and more airmiles than you ever wanted in the worst...
Language and law:
If the Spanish 'land-grab' laws of the 1990's don't put you off overseas investments (the ones where the town hall simply had to say they needed that land for 'public or social benefit' and they had the right to reclaim up to 70% of the land free or pay a tiny percentage of the market value) then be prepared to have all legal documents privately translated before even thinking of picking up a pen - and then cross your fingers that the law doesn't change after signed on the dotted line.
Currency fluctuations:
When you buy a property overseas, you commit to a debt in that currency come hell or high water - and when the exchange rates move against you, it really is hell. If you'd bought property in Europe or the States in the past few years, then the current weakness of Sterling would have increased your mortgage payments by 25% or more by now - a sobering thought.