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For a cheap home abroad, head for America!
What sort of property could you hope to buy for, say, £125,000 here in the UK?
Your money might stretch to a modest family home in the Midlands, a tiny flat in the Home Counties, or a garage (at most) in Central London.
These days, even five times the average wage doesn't buy you a whole lot of bricks and mortar in the UK.
Bargain buys abroad
However, exactly the same budget would buy you a four-bedroom home with a large garden and a private pool overseas. Where? The answer is Orlando, Florida -- one of the tourist capitals of the world and home of the Walt Disney World resort.
What's more, a new worldwide property survey by mega-bank HSBC has revealed bargain properties for Brits right across the globe. According to HSBC, British buyers' budgets go furthest in the USA, while low-priced properties are also found in Spain, Turkey, Portugal and Cyprus.
Here's what British property-seekers can get for their money by buying abroad in three different price bands:
Resort | £125,000 | £250,000 | £400,000 |
Orange County, Orlando, USA | Four-bed house | Six-bed house | Six-bed house |
Alicante, Costa Blanca, Spain | Three-bed house | Four-bed house | Five-bed house |
Bodrum, Turkey | Three-bed house | Four-bed house | Four-bed house |
Malaga, Costa del Sol, Spain | Two-bed flat | Three-bed house | Three-bed house |
Faro, Algarve, Portugal | Two-bed flat | Two-bed flat | Four-bed house |
Paphos, Cyprus | Two-bed flat | Three-bed house | Three-bed house |
Pisa, Tuscany, Italy | Two-bed flat | Two-bed flat | Three-bed house |
Palma de Mallorca, Balearics | One-bed flat | Two-bed flat | Four-bed flat |
Nice, South of France | One-bed studio | One-bed flat | Three-bed flat |
Gryon, Swiss Alps | One-bed studio | One-bed flat | Three-bed chalet |
Falling prices and a rising pound
There are two key reasons why overseas property is becoming cheaper for British buyers seeking second homes or investment properties.
First, property values have fallen steeply from their peaks in several major nations. For example, prices have fallen every year since Florida’s property bubble burst in 2006. However, US home prices are showing signs of levelling off and have even started rising again in some major cities and states.
Second, the pound has been making good gains on global currency exchanges. Yesterday, it hit a 13-month high against the dollar, briefly rising above $1.63 for the first time since August 2011.
In addition, thanks to the ongoing euro-zone debt crisis, sterling has risen 5.7% against the euro in the past six months. As a result, buyers with a £125,000 budget now get €8,563 more to spend when shopping for property in the 17-nation euro zone.
Watch out for purchase taxes...
When buying a property overseas, it's important to budget properly, taking into account all purchase costs, taxes and fees. These range from below 4% to 13% of the purchase price, as the following table shows:
Resort | Purchase taxes and fees |
Gryon, Swiss Alps | 3.8% |
Orange County, Orlando, USA | 5.0% |
Paphos, Cyprus | 5.5% |
Faro, Algarve, Portugal | 6.2% |
Nice, South of France | 9.1% |
Malaga, Costa del Sol, Spain | 10.0% |
Alicante, Costa Blanca, Spain | 10.0% |
Palma de Mallorca, Balearics | 10.0% |
Bodrum, Turkey | 10.0% |
Pisa, Tuscany, Italy | 13.0% |
In tax haven Switzerland, purchase taxes and other fees absorb a mere 3.8% of a £125,000 budget, leaving buyers with £120,424 to spend on a home. In Orlando, these taxes add up to 5%, leaving you with £119,048 to spend.
However, at the other end of the table, property taxes in Pisa, Tuscany are sky-high, consuming 13% of our £125,000. These costs total a whopping £14,381, leaving buyers with a mere £110,619 to pump into property.
...and property and rental taxes, too
Many countries levy annual property taxes on homeowners, both domestic and foreign. As you can see, these range from zero in Cyprus and Turkey to a tidy 2.3% a year in the Swiss Alps:
Resort | Yearly property taxes |
Paphos, Cyprus | 0.0% |
Bodrum, Turkey | 0.0% |
Pisa, Tuscany, Italy | 0.6% |
Malaga, Costa del Sol, Spain | 1.1% |
Alicante, Costa Blanca, Spain | 1.1% |
Palma de Mallorca, Balearics | 1.1% |
Faro, Algarve, Portugal | 1.2% |
Nice, South of France | 1.5% |
Orange County, Orlando, USA | 2.0% |
Gryon, Swiss Alps | 2.3% |
On a property worth £125,000, property tax would be £750 a year in Pisa, rising to £1,375 in Malaga, Alicante and Palma de Mallorca. At the top end of this scale, the yearly tax would be £1,875 in Nice, £2,500 in Orlando and £2,875 in Gryon. Hence, landlords must take these ongoing taxes into consideration when working out rental rates.
Speaking of rental income, this can be taxed heavily overseas, as the next table shows:
Resort | Tax on rental income |
Paphos, Cyprus | 0.0% |
Bodrum, Turkey | 15.0% |
Nice, South of France | 20.0% |
Pisa, Tuscany, Italy | 23.0% |
Malaga, Costa del Sol, Spain | 24.0% |
Alicante, Costa Blanca, Spain | 24.0% |
Palma de Mallorca, Balearics | 24.0% |
Faro, Algarve, Portugal | 25.0% |
Orange County, Orlando, USA | 30.0% |
Gryon, Swiss Alps | 49.0% |
While rental income goes untaxed in Cyprus, rent taxes elsewhere range from 15% in Bodrum and 20% in Nice all the way up to 30% in Orlando and a hefty 49% (close to half) in Gryon.
In France, new Socialist Prime Minister François Hollande is pushing ahead with plans to increase rental tax for foreign owners. It will almost double from the current level of 20% to 35.5%, pushing France from third-lowest in the above table to second-highest for rental taxation.
Taking both upfront and yearly taxes into account, Cyprus emerges top as the most tax-friendly location for foreign property buyers. That's partly why it's so popular with UK buyers -- together with endless sunshine, great food and widely spoken English, of course!
Getting there
Finally, before purchasing property abroad, always find out how much it will cost you (and your tenants) to get there. Here's HSBC's price list for flights and car hire, based on four people making two return trips per year (the first in summer and the second in winter):
Resort | Total |
Costa del Sol | £1,186 |
Balearics | £1,248 |
Costa Blanca | £1,254 |
Algarve | £1,336 |
South of France | £1,482 |
The Swiss Alps | £1,594 |
Tuscany | £1,802 |
Cyprus | £2,218 |
Turkey | £2,363 |
Orlando, USA | £4,464 |
As you can see, visiting the Costa del Sol twice a year costs under £1,200, including car hire. Prices are similar to head to the Balearic Islands, Costa Blanca and the Algarve, but soar to almost £4,500 a year to jet off to Florida. Again, holidaymakers need to factor these travel costs into their ongoing property budgets.
Here's wish you happy hunting for a holiday home!
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Move to the country to save thousands
