The housing crisis in many European countries is attracting more and more investors, attracted by the sharp drop in housing prices.
Buying a property abroad, especially in Spain or Greece, which are traditional holiday destinations, offers great opportunities. For example, house prices fell by 25 to 30% in Spain. But if the case seems interesting from a financial point of view , it is more complex to achieve than the purchase of real estate in France.
Here are our tips to succeed in buying a property abroad and to overcome the pitfalls .
Prospect on the spot
Even though there are many online ad sites and many real estate agencies that offer foreign goods for sale, we advise you to take advantage of your vacation to go to the country where you plan to acquire the property and to prospect directly on the spot .
It will be easier for you to get an idea of market prices and appreciate the different neighborhoods of the city, what an ad site will not do and an agency only partially.
You will be able to revisit the accommodation at different times of the day and take the time to learn about the public transit system and the neighborhood.
In addition, being on site, you can visit several properties and you can negotiate the price more easily than by phone or email. Know that in some countries, “haggling” is part of the habits and customs.
Each country has its own regulations and real estate practices . You will need to make an accurate list of the charges you incur and not just at the time of purchase. For example, it is necessary to inquire at the outset of the tax consequences in case of resale (for example the transfer tax in Spain ).
In addition to the costs related to the acquisition (which correspond to the notary fees in France), also think about you to inquire about the taxes applicable to the housing like the property tax as well as the cost of a home insurance.
Another example with Spain: if you negotiate directly with the salesman, you will escape the IVA (Spanish VAT), but you will have to settle in exchange “the impuesto of patrimonial transmissions” the ITP.
Good to know : remember to learn about local real estate practices. In some countries, a down payment is required to reserve a property. Plan to have the funds to complete the transaction.
Important : Pay attention to cash payments that would not be registered by the notary. If you give up your purchase, the amounts paid will be permanently lost.
Learn about local real estate law
Going abroad to buy real estate also allows you to learn more about the country’s legislation. Be aware that you will have to comply with local real estate law and that you will not be able to benefit from French laws that are particularly favorable to purchasers such as the possibility of retracting within seven days following the signing of the purchase.
Also ask if permissions are needed for a non-resident to become the owner.
Mandatory tax declarations in France
If you rent the property
If you rent the unit, you will have to add the rental income to the annual return , regardless of the country where you pay the tax. But if the declaration in France is mandatory, it will not lead to double taxation .
Taxation on resale
Here again, it will be necessary to know if the country in question is the subject of an agreement signed with France. In general, you must pay the capital gain tax in the country of residence , that is to say in France.
You benefit from the allowance provided by year of detention and will be taxable for the lump-sum levy of 19%.
Except knowing the country where you decide to invest and speak the language perfectly, getting into debt to buy real estate abroad is a difficult operation. Proceed in stages.
- Take the time to gather all the useful information in terms of administrative procedures and taxation as well as the real estate law in force in the country.
- Go on site and conduct all the necessary investigations. Visit several properties and learn about the most buoyant neighborhoods.
- Have the pre-contract re-read by a specialized lawyer.