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Overseas Property Investment for Expats

Unless you’ve been on Mars since mid 2007, you’ll have seen that the global property and financial markets have been in something of a mess – and that’s putting it mildly!

Just about everything that can be said on this subject, has now been said. It’s been analysed and debated to infinity with the TV and newspapers finding vast numbers of experts who have all suddenly had massive attacks of ‘20/20 hindsight vision’ and claiming, of course, to have seen all this coming long ago.

This article does not go down that road again or rehash tired explanations, allocate blame or make forecasts. It is not at all clear what 2009/2010/2011 holds for the various markets and this article does not pretend to have any clearer vision than the many experts, real or self-appointed, than one can find in the newspapers.What we are going to do here is put forward some basic thoughts and propositions about overseas property and how this affects expats whether they’re in place or still contemplating the big step. As such please remember these are personal opinions and thoughts. They could be wrong, and you should always research the financial implications extensively and with experts who understand your EXACT circumstances before forming your own views.

Overseas Property

If one excludes one or two hotspots such as fashionable city centres, some major commercial centres and some up-market beach resorts, there is no doubt that property prices have fallen significantly in many of the traditional destination countries for UK expats.

Countries such as Spain, have managed to attract a lot of negative media attention due to the magnitude of these falls but even those countries that have escaped the intensive media blitz have nevertheless experienced falls that have caused worries to both local and expat house owners.

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Even so, much news coverage has laboured on the desperate state some expats are in due to house price falls, and of course for dramatic effect have completely failed to balance this by looking at the picture in totality.

Nobody is questioning that the position for some expats is serious and one can only sympathise in many cases but while this may be no consolation for those badly affected, it is also a fact not every expat is in crisis due to house price falls.

It is possible to quote facts and figures and tables that compare average prices by country and region but this would distract from a few basic facts that are worth considering for a second.

Variable Effects

Clearly if you’re a potential buyer with disposable cash in the bank, then price falls are good news for you.

If you’re an existing expat owner without a mortgage or plans to sell/move, then worries about the value of your house may exist but they should not be keeping you awake at night. You have no risk of negative equity or being ‘stuck’ pending a move. The fact your house may have theoretically declined in value by 10 or 15% may be regrettable, but it probably is not life changing for you.

Then there are expat property owners who are more vulnerable than others due to a combination of the type of property they own and the location. That’s because, whatever the news or local estate agents may have told you in 2007, the current slowdown and reductions started BEFORE the banking and market crashes of 2008.

Property Markets & Types

Many expats found during 2007 that it was becoming harder to sell their properties for a variety of reasons.

In Spain for example, for several years people had been warning that there was significant overheating in the property market with much of that dangerously skewed towards expat developments. Too many apartment developments of broadly similar type were being built in areas with in some cases totally insufficient infrastructure to make them sustainable in the longer term. They were of a type/cost unlikely to appeal to local buyers and therefore could only be sold to expats of various nationalities. Many were warning that there could not be enough buyers of this type arriving in Spain to take up this slack even if the economies stayed healthy.

Even before the global economic woes of 2008, there were signs that this over-capacity was having an effect. Sellers suddenly found that there were always 5 or 10 other similar apartments for sale in the same locality at the same time, and this inevitably drove prices down. People owning property in this type of location and development were ALWAYS going to be far more vulnerable to economic problems in Germany or the UK than others owning different property types and in different locations. If those expat buyers vanished overnight for any reason, there was no local market for this type of property.

A similar phenomenon arose in France – another major destination for UK expats.

For many years UK buyers had been snapping up cheap isolated rural properties frequently in a poor state of repair but with large amounts of land. The intention was to renovate these rural idyll properties into charming homes and in many cases this was done, but there was a hidden risk.

Though the vast majority of French people love their rural traditions and enjoy visiting the countryside for holidays or weekends, it is a fact that few wish to own and live in such properties. If they want second homes they will tend to look towards the coast and usually seek either modern properties or older character properties in exceptional decorative order. The French do not share the British love of DIY and restoration!

Many French people regard rural houses as too isolated, too old and as a result, too expensive to renovate. For some decades the French have been largely ignoring these dilapidated ‘bargains’ and concentrating instead on buying modern ‘pavillon’ type properties.

The older run down isolated properties in many parts of France have therefore been left to the British, Dutch and German buyers who have driven prices up and up. Inevitably, once there was any sign of an economic slowdown in those countries, the overseas buyers would vanish overnight and local French buyers were never going to be numerous enough, or interested enough, to keep the market moving.

Therefore expat owners of such properties who suddenly needed to move and sell, and particularly those who had not been able to fully complete renovations, have found themselves with houses that are effectively impossible to sell. They have found themselves hit far harder than expat owners of other property types. By contrast owners of more modern properties in some areas have suffered only moderate price reductions, as their properties are marketable to local French buyers.

In Spain and France, as well as most other expat destinations, some owners will be more affected and more at risk than others. One needs to learn the lessons to try and ensure that one is buying into types of property and locations in the lower risk categories.


Property overseas will always be attractive to many people in the UK and other northern European countries for reasons of weather, space, lifestyle and investment. During a difficult year or two the markets may seize up and prices fall, but in the medium to longer term people purchasing overseas can reduce or avoid the risks of catastrophe by following a few basic common sense guidelines broadly along the lines of location, location, location (and property type)!

1. Be careful about buying property surrounded by kilometres of similar developments targeted mainly at foreigners. Expat property enclaves can be very risky destinations in terms of property investment.

2. Look around and see how many ‘native’ Spaniards, French or Portuguese etc are living locally. Be cautious if you can’t find a centre of local population and discount those tiny areas where locals exist only to serve an expat enclave. If no locals are around, this may tell you properties in that area will be at risk if there is a downturn overseas. Look to find a vibrant LOCAL market as well as one with expat buyers/owners.

3. Try to find properties that by architecture or location are visibly ‘different’ and if possible individual. An apartment or house that is indistinguishable to any of 1500 other identical properties within a few hundred metres WILL be particularly vulnerable to any downturn. In a difficult market, having different internal fixtures and fittings is only a marginal benefit.

4. Remember that rural isolation doesn’t appeal to everyone. That finca on the side of a mountainside or the ferme in the middle of a marsh 10 kilometres away from the nearest neighbour may be a very particular taste however well you’ve renovated it. Expect buyers for these properties to be doubly scarce if the markets are shaky.

5. If you’re buying a dilapidated property with the intention to renovate, then make sure you finish the renovations as fast as possible. In a downturn where you need to sell urgently, local buyers and the few expat buyers around will not be inclined to take on other people’s half-finished projects.

6. If you’re buying a rural property that has been empty for years, you may wish to wonder why it has been empty for so long? If you’re buying in a buoyant market and a property is been empty for a long time, you may want to think about how much harder if will be for you to sell if the market is in decline.

None of these things will guarantee you won’t lose money or find your house difficult to sell in any future recession but they may mean that you suffer less trauma than those who chose to ignore these basic facts!

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