x Abu Dhabi, UAESunday 21 January 2018

The dream purchase survives — even if it is a little tarnished

Why you need to take care when buying property abroad.

Consider how the price of an imaginary holiday home rose over two-and-a-half weeks of last year, and you have a salutary lesson on the need for care when approaching the purchase of property abroad.

The example comes from the UK currency broker Moneycorp and applies to a home changing hands between a sterling buyer and a seller based in the euro zone: the €250,000 (Dh1.3 million) home would have cost £207,589 (Dh1.2m) on January 8 last year, but with the way sterling then crumbled, £216,244 on January 25.

The hefty difference of £8,655 would have gone a long way in the furniture store. And it could have happened in the US, the UAE, South East Asia - indeed in any corner of the world where such a transaction occurs between different unpegged currencies.

"If you're buying a holiday home or investment property overseas, when you trade, your currency is crucial," is Moneycorp's message, one that seems blindingly obvious. But it is overlooked time and again by purchasers.

The scope for something going wrong becomes clear when it is seen how many people across the world aspire to overseas property ownership.

Between 2004 and 2006, the number of Britons owning a second home overseas increased from 550,000 to 800,000, on Moneycorp figures.

Ashley Rigg, who as director of Globaledge in London edits a news platform for the overseas property industry, feels the economic crisis has severely affected the market. What he calls "chasing the dream" purchases by people desperate to change their lives - or perhaps just assure themselves of regular sunshine - have slumped to 10 per cent of what they were at their height, he says.

However, he adds that this still leaves a "massive" number of people interested in buying abroad, in such disparate locations as Dubai, Florida and Turkey as well as in the longer-established favourites, France and Spain.

"These days you have the investment market, very savvy buyers who want a good deal purely for rental yield and ease of management, and the retirement market, which is always strong because these are people who cannot wait around five or 10 years for things to pick up but have to buy now."

Charles Purdy, a director of the Smart Currency Exchange, also based in London, takes the contrary view that the dream survives, despite the knocks it has taken.

But he echoes Moneycorp's caution to would-be buyers to keep "eyes wide open", using special care on choice of estate agents and lawyers, as well as being alert to questions of timing if buying in a different currency.