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Expat’s Guide to Renting or Buying Abroad

Friday, 08 April 2022

Taking the leap of faith and buying or renting a property when moving overseas is a big decision and, unfortunately, it’s easy to get very confused in the ‘buy vs rent’ debate.

Ultimately, the decision rests on your shoulders, and you shouldn’t feel pressure about making the ‘wrong’ choice – especially when you’re trading the security of home for a move far away.

There are situations where it’s kinder on your wallet to rent over buying – and vice versa. However, with so many factors at play, it’s not as clear-cut a decision as people might think.

The pros and cons of buying and renting

Buying overseas pro and con

Pros of buying a home abroad

  • After paying off your mortgage, the house is yours and is now an asset, giving you future financial stability.
  • Houses are likely to appreciate, meaning a fantastic return on investment.
  • Depending on the level of mortgage repayments and the size of the deposit, it can be cheaper to buy than rent.
  • Once paid off, the house, flat, or apartment is yours, meaning no risk of eviction or unexpected charges for damages.
  • Money spent on home improvements only increases the value.

Cons of buying a home abroad

  • A sudden change in interest rates can markedly increase repayment amounts at a moment’s notice.
  • Whilst the UK market trend has been for property to appreciate in the long term, that isn’t the case everywhere. If the value of your home depreciates, it can be tough to sell quickly and end up costing you dearly.
  • There are a lot of hidden costs to buying a home. Costs to fix damages, home renovation, surveying, legal expenses, and stamp duty can quickly add up.
  • You can fall victim to repossession if you cannot keep up with mortgage repayments, making it inherently riskier than renting if you’re trying to squeeze every penny from your wages.
  • If the move abroad doesn’t pan out the way you’d hoped, it can be more difficult to just up and leave. Dealing with the stress of selling – with the additional estate agent and legal fees – can make the idea of this big commitment less desirable.

Renting Overseas pros and cons

Pros of renting abroad

  • Whether you’re moving in or out, rental properties are inherently easier to leave behind or settle in with minimal hassle.
  • You’re not tied to a single property. You can upscale or downsize at a moment’s notice compared with the stress of a mortgage.
  • Renting has more choice when it comes to living arrangements – like shared accommodation and house shares – at significantly cheaper rates, letting you spend your capital on other aspects of your life.
  • Renters can avoid recurring maintenance and upkeep costs as well as various property taxes and insurance, making it a manageable option for those with limited savings or income.

Cons of renting abroad

  • Unfortunately, there is no real investment potential. You’re essentially paying somebody else’s mortgage without creating a sizeable asset for yourself.
  • Stability is an inherent issue. You’re at the mercy of the landlord and, subject to local letting laws, can be forced to move at their discretion if they decide to sell.

What to consider when renting aboard

Whether you’re renting or buying, each method has pros and cons. Depending on your financial situation, either option can be viable.

When renting, the main consideration is the cost. Wherever you’re moving to, it’s advised to estimate your living costs before you move.

This will involve:

  • Food
  • Utility bills
  • Public transport or car overheads
  • Entertainment and leisure
  • Miscellaneous monthly outgoings – for example, mobile phone contracts

Each country will have varying administrative fees and different rental rates – and, as in the UK, these may even fluctuate between cities, too. So, be sure to research costs in your chosen destination before making a move you can’t afford.

When emigrating abroad, shipping goods from the UK over to your new home is a major part of the moving process, and an additional cost and stress that many overlook. And, in Europe, it’s not as easy as it used to be – as of January 1st, 2021, there have been major changes to EU regulations regarding shipping and imports.

However, PACK & SEND removes the stress – making sure your packages arrive safely and securely while avoiding any delays when shipping worldwide. We can even pack your belongings for you, giving you one less thing to worry about – see how we can help today!

Avoid Brexit paperwork delays

What to consider when buying a property abroad

Buying a house is inherently more complicated than renting. Not only does it include many more documents and legal processes but buying overseas adds cultural complications, too.

For example, getting a mortgage on an overseas property is made even more tricky because of currency differences.

Typically, UK banks charge high rates for converting sterling into foreign currency. However, specialist brokers can help you get affordable rates and avoid getting caught out by exchange rate fluctuations.

The property rules in each country can also vary wildly. Many countries have land and right-to-place restrictions for overseas buyers, while other countries have additional layers of red tape to navigate.

For example, in Spain, you’re required to have additional licences to rent a purchased property out to tenants. Other countries require a notary – a government-appointed official – who reviews overseas transactions.

Make sure you do your research on any property regulations in your target destination before prepping for your move – or work with an expert to avoid falling foul of complicated local laws or hidden fees.

The Top 10 Ex-Pat Destinations: Key considerations before your move

So, what can you expect from some of the most popular ex-pat destinations? Here are some key considerations when looking to buy or rent a home in each of the top 10 most popular ex-pat destinations.

Australia 

  • Property prices have soared recently, making buying more difficult.
  • In Canberra, for example, house prices have soared 32% year-on-year, meaning renting is an increasingly attractive option.
  • To purchase a property in Australia, it must be approved by FIRB – adding extra layers of red tape to work through.
  • Perth is the most expat-friendly city in the world according to our study, which considered the price of a pint and sunshine hours, amongst other factors important to British expats.

USA 

  • Depending on your budget, certain states might be more beneficial to rent or buy than others.
  • Some states – including California, New York, Maryland and New Jersey have Rent Control legislation designed to keep prices affordable.
  • There are no citizenship requirements to buy a house in the US, but taxation for ex-pats emigrating can be quite complicated.

Canada  

  • Canada is undergoing a surge in housing prices, making it expensive to rent or buy. The rate is higher than any in the OECD, causing an ongoing fear of a collapsing housing market.
  • 80% of Canadians fear they won’t be able to purchase a home in their chosen locations due to the hike in house prices.
  • The Canadian government are in the process of building 125,000 affordable houses to combat the problem.

Spain 

  • The Spanish property market has many quirks, and it pays to do your research before buying.
  • When buying in Spain, be wary of property scams, high capital gains tax, and fluctuations in the property market.

Ireland 

  • Ireland is in the middle of a housing crisis.
  • A lack of affordable housing is sending rent and mortgage prices skyrocketing.
  • In Cork, there are 246 properties to rent and over ½ million population, making buying or renting difficult.

New Zealand 

  • Buying property in New Zealand is similar to the UK, where prospective buyers can negotiate price and a verbal offer is not binding, unless property prices reach over 10millionNZD – then it has to be approved by the Overseas Investment Office.
  • Government officials here heavily promote ‘due diligence’ meaning you can find yourself in hot water if you don’t have an LIM document.
  • These provide information on zoning, how safe your home is from natural disasters, protected local heritage and utilities developments that impact the home.

France  

  • To get a 100% mortgage, you must be a French tax resident, but LTV mortgages are possible up to 85%.
  • French landlords can’t evict tenants between November and April each year.

South Africa 

  • Capital gains tax is high at 33.3%, currently making renting the more attractive option.
  • South Africa’s currency, the Rand, is severely underperforming. When you consider conversion rates, it’s likely you end up paying more for homes that are worth less.

Germany 

  • Germany has an extremely high concentration of renters, arguably because banks are unlikely to give a mortgage to anyone unless a 20% deposit is met.
  • 64% of Germans rent instead of buying.
  • High add-on costs, like extortionate 7.14% estate agent fees and stamp duty of up to 6.5%, do little to entice people to buy.

Italy  

  • Ex-pats are expected to put a 40% deposit down when buying Italian properties.
  • Also, the legal system can be confusing, especially if you don’t speak Italian.
  • Buyers need to be particularly wary of ‘fake’ owners who sell homes they have no legal ownership or rights to – a common scam in the Italian housing market.

However, this isn’t an exhaustive list and there are plenty of considerations when renting or buying overseas.

Make sure to work with a specialist to make your move abroad a smooth one. And PACK & SEND is here to help you with a hassle-free move too, getting all the things you can’t live without to your new home quickly and in perfect condition.

Chat to our friendly team today to find out more about how we can help you with your overseas move.

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