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Buying or Renting?

Wednesday, August 13th, 2014   8:36 pm |  Category:   Retirement locations   |   3 Comments  
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The World recession has changed attitudes to many issues. For expats intending to start a new life in Spain, the option of buying a home before the recession, possibly with a cheap Spanish mortgage was always a tempting one. Good value properties were readily and cheaply available, and mortgages were never too much of a problem to obtain, particularly if you had the right contacts. Of course, this was part of the problem, as Spain and other Mediterranean countries have since found out. As a result, many expat properties are often difficult to sell, many are in negative equity and mortgage foreclosures are a common occurrence, with many expats returning to their countries of origin, bitter and dejected.

 

One of the questions that I am frequently asked by intending expats is “Should I buy or rent a home in Spain?” Many would-be expats have listened to horror stories from returning expats, or read in one of the Brit tabloids about the “horrors of buying a home in Spain” that advise not to buy. “Never buy, always rent” has become the current mantra for some people, and voiced particularly loudly by expats who still have a property to sell. However, this is not always the best advice for the intending expat, and I would caution against taking such advice too seriously.

 

A high percentage of emails that I receive from expats relates to circumstances where things have gone badly wrong in the rental market. Short-term rentals now seem to be the order of the day and if you decide to rent, be prepared to move frequently. Many landlords are speculative and only want to rent out properties during the ‘off peak’ season and like to move tenants on in time to make higher rentals during the main holiday period. Neither do landlords currently like tenants to feel too ‘comfortable’. Many have been badly bitten during the financial crisis with unpaid rents and are cautiously against allowing long-term tenancies. Many expats do not speak the language fluently enough to check the conditions of their tenancy agreements, which should always be checked by a competent and reliable Spanish lawyer; however, select one who can advise you in your own language.

 

Of course, much depends upon personal circumstances, including whether or not you have the capital or mortgage capability to buy a home in Spain; if not, renting is the only available option. Maybe you are retired, have a home in the UK and intend to return in the future, in which case renting maybe the best idea. However, if you intend to make a commitment to your new country and are prepared to accept the advantages, as well as the challenges, then buying a home would always be my preferred option. There is nothing quite like owning your own home, albeit with the help of a mortgage. However, this is on the basis that you do your homework thoroughly first.

 

If you intend to buy, my advice would be to live in rented accommodation in an area where you plan to buy for a year or two. This is to ensure that you actually like the location, as well as giving you plenty of time to look for available properties in an area that you intend to make your permanent home. Look for bargains, bank forced sales, as well as talking to neighbours and friends. By all means, check out the local estate agents as a good source of information but in most cases, it is the locals who know about the best local deals.

 

Whatever the cynics say, it is still relatively easy to obtain a bank mortgage in Spain, particularly if you are working. Speak to several banks, lawyers, developers and people that you know. Remember, that it is still often a case of ‘who’ you know and not ‘what’ you know in Spain. When the time comes to buy, look for a reputable Spanish lawyer. Make sure it is someone well known and recommended to you by friends and neighbours.

 

If you do decide to buy a property, make sure it is for the right reasons. Before the financial crisis, I knew of many expats who would buy properties for a ‘song’, often on unregistered land, hoping to make a large profit when it came to sell the property several months on. Many such speculators were caught out, and this is why so many expats are currently bitterly against purchasing properties in Spain. Don’t let their greed put you off. Remember that you are primarily buying a home and it shouldn’t matter too much if its value rises or falls, particularly in the short term.

 

If you still have a property in the UK or elsewhere, lucky you, because it should provide you with some spare cash to get the new home that you are really looking for. However, don’t keep your old home just in case you wish to return. If you are moving on a temporary flight of fancy, then it may be wise to keep it for a few months. However, if you are aiming for a permanent life in a new country, my best advice is to cut the umbilical chord, and move on. If you should return at a later date, so many things will have changed, that you probably won’t like your old home and neighbours anyway! It is always best to move on and never to look back. I have known many expats to fret so much about their old home, which is either left empty or let to strangers, that they are never able to let go and move on, and enjoy the real purpose of their new lives in the sun.

 

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3 Comments
  1. Bill White Aug 14th 2014  7:32 pm

    I typically am an advocate for buying, but when you purchase a home in a foreign market, it’s not only best to know where you want to live, but also what the buying/selling process is like. Some markets do not have computer systems real estate agents can access (we call it a Multiple Listing Service here in the US) to list a home for sale or view those available to buy. In other markets, even if there is an established system, it could take months or even a couple of years to sell a place. I’m not familiar with how Spain’s housing market works, but if I was going to to purchase a home in a foreign land, I’d only do so with money I wouldn’t miss if I lost 100% of it and could easily walk away if things go awry. If losing all or a good chunk of it would be felt in a negative way, then I’d seriously think twice about buying. But, to each his own. Some of us are more adverse to risk than others.

  2. Gordon Barlow Oct 28th 2014  1:33 am

    One further consideration – age. If you’re moving to somewhere new for the purpose of retirement in old age, you’d have to be crazy to buy. Forget that: you don’t need the hassle. I speak as someone who is old (75), with an old wife (74), and looking to retire in a new country. We will NOT be spending any big money on buying or building.

  3. Paul Soh Dec 17th 2014  12:13 am

    If you want to retire overseas, pay many short visits to the country. Next, rent a home for up to 1 year. Decide whether you want to buy a house after that.
    Why buy a house? A house will guarantee a roof over your head. Always buy a good property already built if buying overseas. Just because land is cheap, it is not worthwhile trying to build a house with no experience in building houses. Never invest too much on an overseas property. Good target is about $150,000. Such property is easy to resell to other foreigners.
    Best case scenario is to rent out your house at home and use the rental collected every month to live overseas. $2000 per month is a lot of money if you want to retire in Chiangmai, Thailand for example.


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