Do you dream of a place in the sun? A villa with a pool, a golf apartment, or maybe a base for skiing?
With money on deposit earning little in the way of interest and more flexible working arrangements available in the wake of the Covid-19 pandemic, for those who have the money put aside, buying overseas is tempting. It is, of course, important to do your homework before taking the plunge to buy abroad.
Sunny side up
If you’ve got the money, an overseas holiday home has appeal. With no more trawling for flights and accommodation, holidays for your family are sorted forever. Easter, summer, midterm break – you know exactly where you will be. Your preferred dates are guaranteed too, without having to pay a peak-season premium.
So what could possibly go wrong? You don’t have to go too far back to find Irish people burned by buying overseas. Thousands of off-plan purchasers who paid deposits to developers ended up losing money after the financial crash in 2008 as Spanish property deals crumbled and developers failed to complete properties.
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Even now, well over a decade later, claims by Irish investors who collectively lost millions are still going through Spanish courts.
Make sure you do a planning search, do your structural survey, do what you would do in an Irish transaction
The story was repeated in holiday hotspots around Europe. Property scams in Italy, Turkey and elsewhere saw people paying large deposits for properties that never got built or were uninhabitable.
In France, it was ski and golf properties, bought and leased back to management companies, that came a cropper. The properties were developed, marketed, sold and managed by French traders under a government Residence de Tourisme scheme.
“The problem was those management companies weren’t regulated and they failed,” says Clodagh O’Hagan of Mullany Walsh Maxwells solicitors.
The Competition and Consumer Protection Commission received 150 complaints from Irish purchasers and is supporting its counterpart in France in their criminal investigation of the matter.
Other buyers simply bought at the top of the market and their holiday property has never regained its value. Many owners are still quite happily sunning, golfing or skiing there, nonetheless.
Buyer beware
It is crucial to do your homework about the buying process in the country in which you wish to buy.
In France, a public official called a “notaire” handles the legal side of transacting property for both parties. They are not acting for you, however. While the vendor must disclose facts about the property such as the Ber rating and information on issues such as termites, the risk of avalanche and asbestos, they won’t say if there is a leak.
“You’ve got to visit the property,” says O’Hagan. “The notaire is only concentrating on the transaction.”
“Make sure you do a planning search, do your structural survey, do what you would do in an Irish transaction,” she says. For those buying in France, she recommends the official notaires.fr website as an impartial resource.
In the case of holiday developments, there will be common areas and amenities such as gardens, pools, lifts and electric gates for the maintenance of which you and other owners will pay an annual service charge. Ask what the charge is and satisfy yourself that the management company is well run in advance.
Knowing what questions to ask is crucial, says O’Hagan. “If you are armed with the questions, you will get the answers. Some people don’t ask these questions because they don’t know what to ask.”
Mortgage
Some banks will consider letting you release equity in your home to purchase a property overseas but others won’t, says Joey Sheahan of mymortgages.ie.
“You need to have sufficient equity in your property and the bank will generally want to see a copy of the contract for purchase of the property being bought,” says Sheahan.
For example, if you owe €100,000 on your home and the value is €500,000, you have equity of €400,000. If you wanted to release equity of €200,000 to purchase abroad, this would mean you’ll end up with a loan of €300,000 versus a value of €500,000 or 60 per cent loan to value, so this should be fine, he says.
Think carefully, however, before tampering with a mortgage you’ve worked long and hard to pay off.
Taxing times
When you buy abroad, there is likely to be local municipal charges, such as water charges, to pay as well as an equivalent to our local property tax. These won’t be mentioned in the property ad so ask the agent.
If you plan to rent out the property, you will have to pay tax on the income. “You will most likely need to file a tax return in the country where the property is located and also back at home,” says Marian Ryan of taxback.com.
Irish residents are taxable in Ireland on their worldwide income. Ireland has double taxation agreements in place with most countries however, so while the income is reportable in both countries, you won’t get taxed twice on the same income, she says.
The advice is to file the overseas return first and then include a copy of the notice of assessment in your Irish return.
“Some countries, like Spain for example, require you to file returns on a quarterly basis and some may even require you to register for VAT,” says Ryan. “In France, you could potentially claim a refund of the VAT paid on the purchase of the property, which is generally 20 per cent of the value if your intention is to rent it out for 20 years or more.”
If you sell the property, you must pay any capital gains tax due in Ireland. You may have to pay some in the other country, but again, double taxation agreements mean you won’t pay twice.
Succession
Nobody is thinking about death when buying a holiday home, but succession laws differ in other jurisdictions and this is worth considering. In France, for example, in the event of your death your property goes to your kids, not your spouse.
“In Ireland we protect the spouse, in France they protect the bloodline and your wife is not your blood,” says O’Hagan. Your will in Ireland won’t trump French law.
In France and Spain, however, there are different ways of holding the property, for example in a company structure, and this can make the transfer of ownership easier.
“If you want your spouse to inherit it, there are ways of doing it, but you set this out when you are buying the property. It’s costly to do it afterwards,” says O’Hagan. Getting the notaire to add a clause when the transaction is going through is easier than revisiting things later.
Where to buy
Portugal
The Irish love Portugal; about 400,000 of us visit every year for the sun, sand and seafood. Dining out remains affordable and children are warmly welcomed. Algarve winters are mild at 16 degrees, making it popular with golfers year round.
The so-called “golden triangle” comprises Quinta do Lago, Vale do Lobo and Loulé, and prices here reflect that. Vilamoura has the highest concentration of golf courses in Europe.
In the village of Santa Bárbara de Nexe you’ll find a two-bed, three-bath apartment with an additional two loft rooms for sale for €380,000 through Quinta Properties.
The property is about a 25-minute drive to the beach and 15 minutes to Faro airport. You can expect rental income of about €900 a month, says the agent, and the property management fee is €600 a year.
Livinginportugal.com was set up by the Portuguese tourist board to assist foreign citizens interested in buying a house there.
France
When it comes to skiing, Morzine in France is popular. Geneva airport is 90-minutes away with frequent shuttles.
Avoriaz is higher up than Morzine and has reliable snow and is readily accessible by a gondola. There is a lively apres-ski scene ranging from fine dining to pubs where you can watch the Six Nations in your salopettes in the company of plenty of other Irish, English and French fans.
Beau Sejour is a large three-bed, two-bathroom apartment for sale through Savills for €497,000. There is a two-bed for sale in the same development for €449,000.
This recently completed development consists of 12 apartments located in the village of Montriond which is a 10-minute walk from the centre of Morzine.
This one is on the top floor with plenty of light, it comes fully furnished and has a southeast-facing balcony.
Morzine is a good all-year-round resort with hillwalking and mountain biking in the summer. Whether you are on the baby blues or black runs, the valley caters for skiers of all levels with ski schools for beginners too.
Rents for similar properties in the area range from €2,000 to €2,500 per week in peak season. For an agent to manage the rental, expect to pay about 10 per cent.
The agent says you can claim back VAT on the scheme to reduce the purchase price by 20 per cent.
Spain
With eight flights a day from Dublin to Alicante, and direct flights from Shannon, Kerry and Knock too, you’ll find lots of Irish holiday homeowners on the Costa Blanca.
A two-bed, two-bath apartment in the recently built gated complex of Amanecer VI in Villamartin is on sale for €239,000. It’s about 40 minutes from Alicante airport.
This first-floor apartment comes furnished including white goods, ducted air-conditioning, an underground parking space and storage. The southwest-facing covered balcony overlooks a communal pool.
This gated community is a short walk to a supermarket, bars and restaurants. The beaches of the Orihuela Costa and the Zenia Boulevard shopping mall are a 10-minute drive away. The championship golf courses of Villamartin, Las Ramblas and Campoamor are within easy reach by car. The annual management fee is about €600 and local taxes are about €300.
