Buying a dream property in France or anywhere else abroad could work out more expensive than many people expect, according to a study.
Research by foreign currency specialists Moneycorp claims that British buyers abroad are being hit by millions of pounds in hidden costs – a total of £2 billion* on bank charges, legal fees, taxes and poor foreign exchange rates.
UK property buyers in popular locations such as Spain, Portugal and France told the researchers they have spent a staggering £19,000 in unexpected costs – costs that could have been avoided had they researched the process more thoroughly, used the most cost effective services and set realistic budgets for themselves.
Despite nearly half (45 per cent) setting a budget of around £9,000 for unforeseen charges a quarter (24 per cent) admitted they exceeded their original financial plans by incurring preventable costs.
The rate of UK investors opting to buy abroad continues to rise – though only a quarter of them (27 per cent) choose a specialist foreign currency provider.
According to Moneycorp, therefore, it is ‘unsurprising’ that a prime reason for overspending is paying over the odds for money transactions, combined with fluctuating exchange rates. Three quarters of overseas property investors could save thousands by using a foreign exchange specialist for their financial transactions, says the company.
Nick Bull, from Moneycorp said: ‘Our research has found that Brits who don’t shop around for the best exchange rates are being hit hard in the pocket by concealed foreign currency costs. Specialist services make it easier – and of course cheaper – to buy abroad, thanks to the ability to provide better exchange rates than the high street banks.’
The study of people who have purchased a property abroad also revealed that one in five (18 per cent) property buyers fail to save money due lack of knowledge and research and one in seven (14 per cent) felt that language difficulties contributed to their high level of unexpected costs incurred.
Overall, legal costs prove the most common reason for budgets to burst – with the average oversees investor splashing out £2,207 on this element of their property purchase. And when added to unforeseen bank charges and taxes – this totals almost £5,000.
And it’s not only the financial factors that stretch buyers’ budgets – unexpected travel costs, builder’s fees and fittings and fixtures also send accounts into the red. More than one in twenty (six per cent) overseas property investors complained of bigger building bills than quoted, with the average buyer splashing out a massive £3,777 on sprucing up their investment.
And kitting out the interior of the home also puts strain on new owners – 5 per cent admitted overspending on fitting out their new dwelling.
So it comes as no surprise that 88 per cent of investors said unforeseen costs can put overseas property owners under financial strain during the home buying process.
Brits Hidden Costs Bill
Foreign exchange cost £3,039**
Building work £3,777
Legal costs £2,207
Bank charges £120
Estate agents fees £2,049
Fittings & furnishings £3,106
* Calculation based on National Office of Statistics figure stating there are 250,000 people that own property outside the UK. Moneycorp’s research found that 45 per cent of overseas property owners spend money on unforeseen costs = 112,500 people. The average amount spent on unforeseen costs is £19,161. (112,500 x £19,161 = £2,155,612,500)
** Exchange rate saving based on the rate comparison carried out by Savills Private Finance for the Sunday Times 19/11/06: