Greek tragedy delivers stark home truths
MILLIONS of Britons dream of owning a second home overseas. But as the Greek debt crisis shows, it can quickly turn into a nightmare.
Britons who own a property in Greece have seen the value of their homes plunge and prices could fall even further if the country quits the euro and reverts to the drachma.
They aren’t the first Britons to come unstuck when buying property overseas. In Spain, hundreds of Britons have seen their villas seized or bulldozed by the local authorities because they didn’t have the right planning permission. Years on, they are still fighting for compensation.
And tens of thousands of Britons who bought in Cyprus with Swiss franc mortgages found they couldn’t afford the repayments when the safe- haven currency spiralled after the financial crisis. Jordan Tilley, head of UK and Europe for UKForex, said Britons with property in Greece are stuck between a rock and a hard place. “Since the outbreak of the debt crisis, property values have dropped by more than a third.”
Even if they can find a buyer, Britons will find it difficult to get their sale proceeds home as the government has imposed strict capital controls, Tilley said. “The only option for British owners may be to sit out the crisis. There is little else you can do.”
There may be a once- in- a- lifetime chance to pick up a cheap property in Greece but now is too early to take the risk.
If you are looking to buy in another foreign holiday hotspot such as Spain, France or Italy, you have to plan carefully, from arranging finance to getting legal advice.
Clare Nessling at overseas mortgages specialists Conti, said the simplest way to raise funds is to borrow money against your UK property. “However this means your own home will be at risk if you can’t afford to keep up with your repayments, or can’t sell the property to clear the debt.”
There are plenty of low- cost overseas mortgages but think twice about taking out a loan in a currency different to the one you earn your income in. Nessling said: “Even small changes in exchange rates can make a big difference to the purchase price of your overseas property, your monthly mortgage payments or future rental income.”
The pound is riding high against the euro at around € 1.41, making eurozone property cheaper but there is no guarantee it will always be so high. If sterling has fallen by the time you sell you could end up losing money, even if the property has risen in value.
Nessling said you should never proceed with any property purchase without instructing your own lawyer. “This should be an independent English- speaking solicitor with absolutely no links to your seller, estate agent or developer.”
Before buying, work out your exit strategy. Peter Esders at international legal services firm Judicare Group, said: “How easy will it be to sell the property? Is there a ready market of buyers? How easy will it be to get your cash out of the country?”
If you hope to offset the cost of your property by renting it out to holidaymakers, you have to do your sums carefully. Esders said most buyers will struggle to cover the cost of their mortgage from holiday rentals alone. “The larger the mortgage, the more difficult it is to cover from the rental income.”
Think carefully before buying a flat or apartment that is only serviced by budget airlines. “If that airline pulls its route you could struggle to rent out your property or even get to it yourself,” Esders said.
Douglas Salt, director of Frank Salt Real Estate, Malta, warned against buying somewhere too remote. “Access to beaches, restaurants, shops and public transport will all make your property easier to rent out or sell when the time comes,” he said.