Is buying property overseas a good idea?

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The idea of buying property in a foreign land has been gaining popularity among people in the last few years. People who are frequent travellers sometimes prefer to own a property that is readily available to them throughout the year rather than renting out a place and adjusting in an unknown environment every time they travel. Some individuals look forward to simply enjoying a retirement home in the later part of life in a land they once visited and liked. For many people however, buying property overseas is purely for investment purposes which helps expand their assets base. By diversifying their investment portfolio, they decrease the risk of financial loss as they have put their money in several different ventures.

The whole concept of owning property overseas has become even more relevant after the Covid-19 outbreak worldwide. Some experts are predicting that people will now be interested in buying property in countries that are not hugely impacted by the virus as of yet. This thought is being supported by the numbers presented by a few real estate websites, that have seen a rise in online traffic from people who are not local residents of that particular country. However, the number of people who will actually invest in real estate overseas in the post Covid-19 world remains unclear, as sales need to happen for reaffirming the data.

Few countries like France, Canada, Spain and Italy, which were previously among the hotspots for overseas property buyers have been adversely affected by the virus. This can also motivate clients to think about expanding beyond the countries that were previously considered as favourites. However, that being said, now is the time when real estate companies are making sure to maximize the ease that technology can offer. Companies have now started giving virtual tours of properties to the prospective buyers.

Another reason for investing in a hard asset in a country that has been relatively less affected by Covid, is because real estate is not as risky as the other investments like stock market and shares etc, which are rapidly impacted by the unfavourable trends of economy. We have seen recently how big companies are downsizing and retail stores are closing down worldwide, hence making the stock market even more volatile than ever. This is again a time to re-think your investment strategy and research the real estate market in home and abroad. 

Buying a residential or commercial asset for the sole purpose of generating a rental income is always one of the key reasons behind investing in property overseas. This ensures investors with an additional earning in a foreign currency which can benefit them depending on the exchange rates and where the prospective buyer resides. This idea has become even more widespread after “Airbnb” gained popularity worldwide. Buying real estate in cities that are considered hot favourite for holiday destinations makes it worthwhile for an investor as they do not struggle with finding short-term or long-term tenants.

Owning a property in another country can sometimes also act as a gateway to acquiring residency/citizenship of a foreign state, hence making it easier for people to immigrate from one country to another.

Buying property overseas, however, comes with its own baggage. Firstly, there is the risk of entering unchartered territory where you are not a local. That means you need to do a lot of prior research about the neighbourhood and locality in which you are looking to own the property. You also need the assistance of a genuine and well-reputed lawyer to help make the process smooth for you as he will be that one key resource who is going to answers all your questions regarding the different rules and regulations of the foreign country. Sometimes, arranging finances in a foreign country can also become a challenge as bank policies are different for foreign nationals.

Another factor that discourages many people from buying property overseas is the presence of high taxes in both the home and foreign country. Capital Gains Tax (CGT), a form of taxation imposed on the profit made from selling an investment is also sometimes one of the downsides of buying investment property abroad. However, depending on the country and the rules that they have set for the CGT, some people can avoid it by selling the property after a certain time period. There is also the issue of a higher down payment in case the buyer is a foreign national and some countries demand that the foreign buyer pays in cash, which occasionally is not favourable due to exchange rates. Getting any unexpected maintenance work done can also be quite a challenge in a foreign land when you do not reside there yourself. Hiring someone to manage it on your behalf can also be quite expensive and hence not viable.

Real estate is a massive investment, when someone devotes so much money, time and effort into buying a property overseas, they generally look at reaping the long-term benefits. This gives them the motivation to put their money in the right place and for the right reasons. Therefore, it is always sensible to do your thorough research and plan according to your circumstances while keeping the market study in mind.

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