The Top Six Overseas Property Investment Questions, Answered

17 Apr 2024

Whatever the shape and substance of your overseas property investment portfolio, you do not want to be overexposed to uncertain market conditions. Property has long been considered a safe and stable investment option, particularly when compared to more volatile alternatives, such as stocks and shares. 

Whether you are looking for long-term capital growth or income generation or a combination of the two, there are several things to consider before making an overseas property investment that is right for you.

Why Look At Overseas Property Investment?

The purchase of property is seen to be a prudent investment as it can provide an individual with a solid income. It also adds diversification to a portfolio that may otherwise be focused on stocks and shares. Overseas property investment had the added benefit of providing geographical diversification, spreading risk over various markets.

While property on home turf often holds appeal, once people investigate offshore markets, they can find the benefits to be lucrative. Exchange rates, regulations or tax benefits can favour the overseas investor.

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How Does IP Global Choose Overseas Property Investment Opportunities?

At IP Global our approach to overseas property investment involves extensive research and due diligence that can be best summarised by the ‘PIE’ acronym: understanding each market’s Population, Infrastructure and Economy before making recommendations.

Firstly, as a location’s population grows so does demand for dwellings, driving property prices upward.

Secondly, infrastructure and connectivity are key. A government’s approach to regeneration and improvements to transport infrastructure often correlates with rising population density, further increasing an asset’s value.

Finally, a stable and robust economy with diverse industries and growing employment levels makes for a promising overseas property investment opportunity.

What Should Investors Consider Before Making An Overseas Property Investment?

There are plenty of considerations to take into account before making an overseas property investment. How easy will it be to extract profit? What are the income, capital gains and inheritance tax implications of investing in foreign markets? For example, properties in Berlin are now extremely popular because, in comparison to British properties, they do not undergo capital gains tax if held for ten years.

Although a market may appear attractive for investment, when considering overseas property investment, it is important to understand the entire purchase process. What are the legal and tax implications for foreign investors? Variables such as how and when to apply for a mortgage should be considered; the procedure changes significantly under different jurisdictions and can be challenging in unfamiliar markets. A trusted mortgage adviser to guide you through the process is often an invaluable partner.

As a foreign investor, it is also important to consider the exchange rate and how currency fluctuations might affect overseas property investment in the medium to long term. 

Currently, the strengthening US Dollar, combined with Brexit concerns, make it cheaper for overseas investors who are residing in countries such as the UAE or Hong Kong, which are pegged to the US Dollar.

Once the purchasing logistics have been confirmed, potential investors also need to conduct due diligence on their partners on the ground, from the developer to lettings agents, to the property management teams. Understanding the local rental market is key to ensuring strong demand and future saleability prospects. Again, choose any partners wisely and work with advisers who have a strong track record of success.

Purchasing a buy-to-let property can enable investors to repay their mortgage via the proceeds of their rental income. In the last decade, customer-buying behaviour has changed with investors becoming more cautious. 

Instead of buying trophy properties outright, clients are more inclined to use their budget to buy multiple properties in a range of locations, spreading any risk. They also use mortgages as leverage to maximise their returns and enable their money to go further.

Even if you have the available cash to purchase your property outright, there can be strategic advantages to leveraging (borrowing money) to finance an investment. Investors can not only buy more than one property but buy types of property that they could not otherwise afford. For example, an analysis of IP Global’s London property portfolio found the return on property investment was magnified 2.7 times on average using this strategy.

What Should Overseas Property Investors Look At On An Ongoing Basis?

Once investors have made overseas property investments, it is important to constantly assess their value and progression and, if necessary, re-evaluate any related strategy whilst simultaneously managing tenants and property upkeep. 

Many expatriates who have overseas property investments are working on a contract basis so it is worth planning ahead, particularly when it comes to reselling. 

However, purchasing property overseas often provides more freedom in this respect. Generally, IP Global recommends a 5 to 10-year minimum hold on an investment property.

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Why Choose IP Global For Overseas Property Investment?

For many investors, the legal, mental and financial implications of overseas property investments can be daunting. IP Global has local and global expertise in end-to-end servicing, from research and arranging mortgages, to facilitating purchase and conveyancing, handling lettings and managing the property, as well as advising on the optimal time for reselling.

Ultimately, the key advantage of making overseas property investments is that they provide continuous reliable returns through capital growth and rental yields, with minimal active management. 

For individuals wanting to drive their net worth, having an overseas property is a reliable asset. And for those living and working in locations with an opportunity to monopolise on a strengthened US Dollar, the time to buy is now.

FAQs

Investing in overseas property can be a sensible investment for those looking to diversify their portfolio and potentially earn returns on real estate beyond their domestic market. 

Overseas property investment allows investors to capitalize on markets with different economic cycles, property demand, and growth potentials compared to their home country. 

It can offer benefits such as rental income, capital appreciation, and tax advantages in some cases. However, it's essential to conduct thorough research on the legal, tax, and economic conditions of the target country and consider factors such as exchange rates, property management, and political stability. With careful planning and due diligence, overseas property investment can be a valuable addition to an investment strategy. 

For those considering such investments, partnering with a firm experienced in international markets, like IP Global with investments in 18 countries and 45 cities, can provide valuable insights and support.

Investing in overseas property comes with several risks, including the location's political, economic, and environmental factors, as well as currency exchange rates. 

Additionally, each country has unique transaction processes and regulations for property investment. Global real estate investors must also consider the investment's business model, market, development team, and exit strategy to assess its risk and potential success.

Stamp duty is a tax imposed by the government on property purchases in the UK. This tax is processed by your solicitor, and the amount of stamp duty you'll owe depends on the price of the property you're buying. 

In the UK, Stamp Duty rates increase from the normal amount when you buy a property that is additional to your main residence, regardless of whether this additional property investment is within the UK or overseas.

Rates for this increase vary throughout the UK – in England and Northern Ireland the rate increases by 3%, in Scotland the increase is 6%, and in Wales it is 4%. To learn more about stamp duty or to calculate how much you need to pay take a look at our stamp duty calculator.

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