The problems of first-time buyers have been extremely well documented so the results of a recent survey from the Bradford & Bingley Building Society come as no surprise.
In it, 2/5 potential first-time buyers are holding down two jobs, 42% are receiving help from their parents and 43% have even thought about giving up buying altogether.
In this current climate, buyers are having to come up with ever more innovative ways of getting on the first rung of the ladder, and an increasing number are buying their first property abroad. A recent survey from YouGov found that nearly half of 18 to 29-year-olds plan to buy abroad and that for two thirds of these it would be their first purchase.
There are two main strategies for buying abroad. Firstly, the so-called jet-to-let schemes in which buyers purchase a home abroad at prices far below the UK’s, and use the rental income to pay for a mortgage on a home-based property.
Another more recent phenomenon is ‘overseas and sell’. This is when first-time buyers purchase properties off plan, without viewing them, and sell on completion for high returns.
As in the UK, buying a property off plan can reap significant rewards. Often, particularly in property hot spots, prices can rise significantly between the foundations being laid and final completion of the house or apartment. If you sell promptly once the building work is finished, you only have to fork out a deposit, rather than the full amount. The returns made can be significant and sufficient to buy a house back here.
For the strategy to work well, you have to know where the booming property hot spots are. Southern Cyprus is one such area. A deposit of as little as Â£10,000 will secure you a home, and with Cyprus experiencing annual rises in property prices of around 15 to 20%, the returns to be had between first brick and last are obvious.
As Jonathan Pearson of Cambridge-based Encore New Homes points out, however, buying abroad isn’t always quite that simple.
“As well as a deposit, you’ll need to find overseas legal fees, which can often be higher than over here. Stamp duty can also be higher abroad, up to 10% in some countries compared with 1% over here. Equally, UK lenders are often hesitant in granting large mortgages to first-time buyers looking abroad, even in established overseas property haunts such as Spain and France. And of course, once you own the property, you then have the issue of how to look after it. Visiting regularly, or paying an agent, will both put a hole in your pocket.
“Be aware of the currency risks as well,” he says. “Exchange-rate movements may increase your liability under a foreign currency mortgage.
“Always do your research before you buy. By their very nature, first-time buyers are the least experienced in the property market, and it’s easy to get carried away by stories of high returns and low risks. For instance, if you’re planning on buying to let abroad, what’s the market like in the country in which you are buying? Equally, if you’re hoping for capital appreciation and rental income, be aware that the two don’t normally go together in countries where people traditionally rent their homes.
“Don’t be seduced by unproven marketing literature unless you are absolutely confident you know what you’re doing. Remember, despite recent events, property does not always increase in value. And if possible, always view property before buying it. You wouldn’t dream of not going to visit a house in the UK before you made an offer, so why should abroad be any different?
“Always seek independent advice and enlist the help of an English-speaking lawyer, wherever you are.”
Source:Â Cambridge Evening News