If you are reading this post then it is probably safe to assume that you have decided to move overseas, or are at least considering it.
Of course, this is a big decision in anybody’s life and it is rarely taken lightly. The worst part is that making the decision to move abroad is just the first step in a process that may take years before you feel properly “at home” somewhere again!
One of, if not the biggest decision you will have take is the kind of property you will live in. This decision can be influenced by many factors. Why have you moved abroad in the first place? For work? Study? To sample a different culture? To raise a family? To return to the country of your birth?
If you’ve moved for work, you are most likely to be concerned about how you are going to get to the office and back. If you wish to study, you’ll need access to libraries, and perhaps good public transport links. If it’s family, perhaps you will target areas with good schooling and plenty of activities within easy reach. For the experience, you may well want to be near wherever the action is. Returning home, you may want to be near family and relatives.
Another key factor is how long you expect to stay in your new surroundings. This is perhaps the most important variable to consider when deciding if you want to live in rented accommodation abroad, or a permanent home that you either buy outright, or take out a mortgage on.
If you are older and you have decided to retire to a foreign country, or the country of your birth, then naturally it makes sense to consider buying. This is a permanent move and you want it to feel like home, have family to stay, and perhaps leave a valuable property behind for your children.
But on the other hand, owning a property brings with it a lot of responsibility. If you are elderly you may like the comfort of knowing that there will always be a lettings manager or landlord around to fix problems, resolve disputes, and all you have to do is settle the rent each month. You may not reap the rewards of a property investment, but then the value of property can go down as well as up. Long term rental can sometimes represent the wiser option.
Equally, if you are younger and have moved for the sake of your career, and perhaps you are even considering raising a family overseas, then the question of whether to rent or buy will doubtless be on your mind.
It can be tricky, because with a move abroad, nothing is guaranteed. You may initially think you want to live in a country for a decade or more, but a few bad experiences might change all that rapidly. The last thing you want to be stuck with if you are looking to leave an area quickly is a mortgage on a property. It’s a headache that you just don’t need.
Balanced against that is the fact that, renting tends to be more expensive than paying a mortgage, and there is no payoff at the end of the cycle. Imagine if you lived somewhere for more than two decades – easily enough time to take out, and pay off, a mortgage, without ever taking the plunge. 20 years of wasted rent, and still no home? It would have to go down as a missed opportunity.
The Gulf News community recently discussed renting vs buying in Dubai. At the higher end, renting in Dubai can cost as much as £18,000 (90,000 UAE Dirham) per year, and generally speaking, rent, or a mortgage, will represent your biggest monthly outgoing.
Looking at all the costs, although you will likely spend far more initially buying a property; when you take into account Land Fees, agency or broker fees, deposit, furnishings etc. the figure could rise as high as £100k; over time, the difference is eroded by high rental costs on the one side versus mortgage repayments on the other.
The article in question concludes that whilst renting over a 20-year period is likely to set you back not far off half a million pounds, with nothing to show for it at the end, in that time mortgage repayments would cost much less; £350-400k; and leave you in possession of a Dubai property!
In this instance, we are discussing a small flat in a sought after location in Dubai, so just imagine what the difference could be like if you were renting a family home over a 20 year period.
There can be no doubt that buying abroad is a very tempting option; even if you don’t end up staying overseas for a 20-year period, there is always the buy-to-let option. Whilst the amounts required for a deposit in the UK are astronomical today (realistically, £20k plus at least), overseas, you may find property companies and mortgage providers are a little more generous, and that your money goes further.
So now you are probably no closer to making that decision about whether to move abroad, let alone whether to rent or buy when you are there; but don’t panic!
Here at The Money Cloud we have been doing plenty of research into the overseas property and can offer you a helping hand. The subjects we have covered so far include:
A checklist to run through as you mull over whether to buy property overseas, or not?
10 of the hottest destinations to buy money overseas
I’m moving abroad; should I open a local bank account?
How can I secure a mortgage on an overseas property?
How to calculate tax on your overseas property?
We hope that these posts help you to make the right decisions about relocating abroad and about whether you ultimately decide to buy, or rent. We will be posting more so don’t forget to check back from time to time to see what’s new. And naturally, we welcome any feedback or any advice that you may have, based on a real-life experience, or even if you are still deliberating, and have come to some interesting conclusions.
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