Venturing abroad
Although Peter Mayle and his wife traveled to France as often as they could every year, “during the long gray winters and damp green summers” in England, he longed to return to the vineyards, quiet streets, perfumed olive trees and open-air markets of France’s picturesque backcountry.
“It had always been an ambition of ours to get a house there and move,” Mayle said. So, in the late 1980s, the couple went after that dream, sold their Devon home and bought a property in the village of Menerbes, about an hour from Marseilles.
They spent the first year renovating the home and getting to know the people, the culture and the language of the region. And the rest is history. In 1991, Mayle’s account of the couple’s ups and downs, “A Year in Provence,” became a bestselling book.
Admittedly, the decline of the dollar against the euro and the pound may make that hillside villa in Tuscany, romantic pied-a-terre in Paris or a shabby chic studio in London’s trendy Notting Hill seem out of reach. But if buyers do some research and take their time, experts say, they can be in a good position to secure a home abroad.
The European property market continues to beckon U.S. buyers and residents eager to park their dollars overseas rather than invest domestically. Of the 500,000 to 600,000 foreign properties owned by Americans living abroad, according to a November report commissioned by the National Assn. of Realtors, the most popular locations are Canada, Mexico, Italy, Germany and Britain. And though housing prices in many European countries outpace the market here, when compared with large U.S. metropolitan areas there are deals to be found in Southern and Eastern Europe, experts say.
“You don’t get as good a value as you would have a couple of years ago,” said Jim Gillespie, president and chief executive of Coldwell Banker. But buyers can spend their time making an informed decision while the dollar has a chance to get stronger.
“Get a feel for if you like the area” by renting locally, Gillespie advised. “And look to buy at the end of the first year.”
As with any real estate transaction, said Jonathan Hewlett, director and head of the London region for Savills real estate firm, an impulse purchase can be costly.
Los Angeles resident Judy Moore may not have jumped at the first thing she saw, but she could have taken a closer look around when she bought a five-floor, 1,500-square-foot fixer in Perpignan, France, for about $122,442 a year ago. “The roof, which we thought was in fine shape, was leaking badly after a hard rain and cha-ching, 9,000 euros [$12,964],” said Moore, 54, who lives in the Carthay Circle area of Los Angeles, and designs and manufactures equestrian clothes. She was directed to Perpignan by a friend and former neighbor who also owns a home in the area.
“Then the dollar, which was trading at about $1.30 to 1 euro when we bought the place in December, fell considerably,” she said. Last week, it cost about $1.44 to buy 1 euro.
Moore’s long-distance makeover has necessitated seven trips so far and a few surprises. Ultimately, Moore plans to spend an additional $144,000 renovating the 14th century European gem to create four apartments for weekly vacation rentals.
Adding up benefits
But with the Mediterranean coast only 10 minutes away, the Spanish border within 30 minutes and a five-minute walk to the local daily market for fresh bread and cheese, Moore remains upbeat. “It’s been a fun project.”
Why buy in Europe?
Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate, said many boomers are taking advantage of low, long-term interest rates and their increased equity in their principal homes to achieve a dream of living abroad. And with the U.S. market slowing, more Americans also are looking overseas for vacation or investment properties.
For example, U.S. residents made up 5% of London-area buyers in 2006 and 8% as of October this year even as the dollar flagged, according to statistics compiled by Savills.
The 2007 Coldwell Banker Home Price Comparison Index, which compared the cost of a 2,200-square-foot, four-bedroom, 2 1/2 -bathroom home with a family room and two-car garage in 317 markets, found that some good international deals exist but not everywhere.
The study ranked Dublin as the most expensive market, at $2.1 million, outside of North America, followed by Milan, Italy, $1.9 million; Rome, $1.7 million; and Paris, $1.7 million. Bogota, Colombia, ranked as the most affordable foreign market in the study at $140,100.
Although most U.S. buyers purchase a second home in Europe for vacations or retirement, active buy-to-let markets provide another option for investors who can then rent to locals priced out of the market as well as American tourists, students and corporate travelers.
Rent prices rose about 10% across England this year, said Malcolm Harrison, a spokesman for the Britain-based Assn. of Residential Rental Letting Agents. Average weekly rents for apartments in central London were about $1,100 for the second quarter of 2007, $450 in the southeast and $300 in the rest of the country.
When buying to rent or lease, look for a serious bargain, Harrison advised. Research the local market and find out what types of properties traditionally attract tenants. And don’t be afraid to approach local firms with international branches when looking for corporate tenants.
“Talking to a local letting agent is vital before buying because you can be on one end of the street and demand is for one-bedroom flats,” Harrison said. “On the other end of the street, demand might favor a three-bedroom terraced house. But only a letting agent will know.” Look for places in high demand with access to transportation, schools and shopping.
Considering homes in more than one area?
“For each market, get a full-service real estate agent from the local region who knows the laws, how title is taken and what challenges might come up,” Gillespie said.
Before hiring an agent or firm, research the company. Interview two or three owners or managers and ask for references on their top people and American clients and find out what kind of experience they had with that company or agent.
To ensure you’re dealing with a reputable agent, stick with established names, Gillespie advised. Some large national brokers, such as Coldwell Banker and Sotheby’s, have offices abroad. And many top residential brokerage firms, including ERA and Century 21, offer domestic buyers a safe shopping platform and online access to easily search for homes in multiple countries. In addition, NAR ( www.realtor.org) has a network of Certified International Property Specialists, and the International Consortium of Real Estate Assns. ( www.worldproperties.com) provides links to international sales professionals and properties worldwide.
Be aware that real estate descriptions stateside and in Europe are not the same. What constitutes a bedroom to a European might look like a large closet to an American. And size, often given in square feet in England and meters in Europe, also can be misleading or missing on listings of some older properties.
So before signing any preliminary contracts, make sure the document specifies exactly what you’re buying (property boundaries, additional structures, furniture, fixtures, appliances, for example) and any obligations such as obtaining a loan.
Even with a reputable agent at your side, buying abroad isn’t without risks, Conway cautioned.
The local currency may decline, reducing the value of the investment. Political unrest, property rights and local laws may cause concerns. Access to roads, electricity and water may incur additional fees and charges. Infrastructure may not be available.
Because asking prices may be only the beginning, investors need to take into account every service for the purchase, Conway said, including typical fees (lawyers, taxes and insurance, for instance), the not-so-typical (translation, notary and valuation) and ancillary costs for utilities, travel, maintenance and communications.
Compare the interest rates, terms and fees from different banks, both at home and in Europe. Find out the tax implications of owning in the area. And consider the risk of buying in one currency and financing the home in another.
Beth Makatura, vice president of international service and operations for New Jersey-based real estate franchiser Realogy Corp., said title insurance is available in many countries, including France, Poland, Turkey and England.
Hidden costs
Conway said fees can be an additional 10% to 15% of the property’s asking price. So always check in advance whether you need to pay commission or any extras on top of the sales price. And don’t be afraid to ask for help, either with the language or with a transaction.
During the property search, check with the town hall to see whether development plans for the area might affect values.
Moore expects prices in her area to rise when a new high-speed TGV train under construction to Spain is completed in spring 2009 and reduces travel time from Perpignan to Barcelona from almost three hours to 50 minutes.
And consider the amount of time it will take you to get to your property abroad. “For me, it’s 24 hours, door to door,” Moore said.
Even with miles to travel between her two homes, Moore said she is glad she bought in Europe.
“How can life not be good in a place where the sun shines 300-plus days a year and the local cheese shop sells 200-plus varieties of perfect cheese?” she asked.
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Michelle Hofmann can be reached at michellehofmann@earthlink.net.
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For more on global real estate markets
To locate international offices or explore other properties around the world, visit these sites:
www.coldwellbanker.com/servlet/InternationalMap
globalnewhomeresorts.worldproperties.com
www.relohomesearch.com
www.homesgofast.com
www.french-property.com
www.creme-de-languedoc.com
-- Michelle Hofmann
