Best-value countries to buy property abroad revealed

Dreaming of a retirement in the sun or a second home in paradise? New research has revealed the most affordable locations to buy a home overseas, as well as the property markets experiencing the strongest growth.

Bulgaria has emerged as one of the best-value locations to buy property abroad, analysis from FairFX has revealed. The currency exchange firm has named Monaco, meanwhile, as providing the least value for money.

But is it safe to invest in overseas property? Which? dives into the data and explores your options for buying a property in another country.

Cheapest countries for buying property abroad

When working out the cost of buying a home overseas, you need to consider local living expenses as well as the price of property.

Research by FairFX has ranked countries worldwide based on the average cost of a two-bedroom apartment as well utilities, broadband, mobile phone contracts and buying and running a VW car.

Based on this index, Bulgaria has emerged as the most budget-friendly option. Its average two-bed apartment price of £92,093 is relatively affordable, while living expenses come to just over £18,000 a year. Situated only three hours from London, and boasting stunning coastline, its also a practical choice for a holiday home.

Other affordable European options identified by FairFX include Ireland, Poland and Croatia.

Brazil was ranked as the second-cheapest location, with two-bedroom apartments costing £96,571 on average and living expenses at just over £16,000 per year but the 11-hour flight will deter many Brits from this option.

Monaco was found to be the most expensive location for people buying overseas property, with the average two-bed apartment there costing a whopping £7.365m. Many other popular European countries also proved pricey, with Switzerland, Germany, France, Spain and Portugal all ranking among the locations providing the least value for money.

Of course, this index just gives a snapshot of potential costs. There are other factors to consider, including the tax liabilities youll face (both in the UK and abroad), the political and economic stability of that local market and regulations around property ownership by foreigners.

Keep in mind as well that the most appealing locations within cheaper markets are likely to command a premium for example youll pay much more to live by Bulgarias popular Black Sea resorts than in the countryside.

Global house price growth

When youre putting a large sum of money into a foreign home, you should first do your research into the local property market.

House prices can move down as well as up, and they could be influenced by a huge range of local, national and global factors. For that reason, while property is a popular investment, theres no guarantee of making a return and you could end up losing money.

Bulgaria has seen relatively strong price growth in the past 12 months, according to the Knight Frank Global House Price index, with prices increasing by 8.2%.

Ireland has also experienced substantial growth, with average house prices up by 12% over the year, and Croatia has seen increases of 8.5%. Polish house prices, on the other hand, have increased by a relatively modest 2%.

Its vital to be aware that when it comes to property, past performance is no guarantee of future growth. In fact rapidly rising prices may indicate that the market is peaking, meaning you risk buying just before prices plateau or dip back down.

Its also worth remembering that national trends will not give you much insight into whats happening at a local level. Just like when youre buying in the UK, you should look at prices for similar houses in the same street or local area, as well as considering what your specific property has to offer.

Remortgaging to buy a home abroad

If youve owned a UK property for a while, youll probably have built up equity both from paying down the loan and the propertys value growing over time.

One way of financing an overseas holiday home is to remortgage your UK property and release some of its equity. Whether this makes sense for you will depend on your circumstances including how much of the loan youve paid off, current interest rates and your financial situation.

If youre interested in going down this route, its important to make sure you fully understand the financial implications, including how much the new loan will cost and whether you can afford to keep up with payments on both properties.

Borrowing to buy overseas

If you want to borrow to buy a home abroad, youll need to get an overseas mortgage.

All of the main UK high street banks offer overseas mortgage services, but they dont all operate in every country.

If you do use a UK bank to help you arrange an overseas mortgage, you may need to deal with the foreign arm of the bank once the loan is in place.

As an alternative, you can opt to deal with a local bank in the market youre buying in by working with a specialist broker. However, keep in mind that overseas mortgage brokers arent covered by the Financial Conduct Authority, so you could struggle to get any compensation if you were given poor advice.

Borrowing in a foreign currency can present an added risk, as currency fluctuations could drastically push up the cost of your loan. You may also need to put down a higher deposit in Spain, for example, overseas buyers are often expected to put down up to 40% of the property price.

In all cases, its vital to get expert advice before buying overseas, from both a specialist broker and a property lawyer with expertise in that jurisdiction.

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