You may not think it, but Covid-19 and the cost of living crisis have sparked a rise in people’s interest in purchasing a second home abroad.

In 2021, a global survey found that 33 per cent of respondents, compared to 26 per cent in 2020, said they were more likely to buy a second property (Knight Frank).

Also, the number of potential UK buyers contacting estate agents in Spain was 36 per cent higher in April 2022 than in April 2021 (Rightmove). Rightmove also noted that buyer demand across all overseas countries jumped 18 per cent in April this year.

With living costs rising, more people are weighing up the benefits of owning a home abroad. If this aligns with your thoughts, what else will you need to know about managing a second home overseas?

Below, international transfer specialists, Clear Currency, help you find out.

Q: Why might you consider buying a second property abroad?

A: The increase in remote working has made it more feasible for families to relocate for a better quality of life. For others, buying a home in another country provides the perfect opportunity to get away and holiday in warmer climates.

Eastern Daily Press: Use Clear Currency's secure online payments platform to complete international transfers efficiently and purchase your dream holiday home.Use Clear Currency's secure online payments platform to complete international transfers efficiently and purchase your dream holiday home. (Image: Getty Images)

It can also be a worthwhile investment for the future. You may use your second home as a place to retire or to earn additional income by letting it out to holidaymakers.

Q: What will I need to consider before purchasing a property overseas?

A: It’s a good idea to research potential locations and find out more about the local community. This could help you find work if you decide to move to your new home permanently later on. Select a location that’s popular with tourists if you plan to rent, so you can make a stable return, which may help cover the mortgage on your second home.

Your property should also be in a place where you enjoy spending time. It’s best to visit the area first to get an idea of how life in another country looks.

Speaking with a local estate agent can help you get an idea of the local property market, find a home that suits your needs and get the best value for your money.

Q: How can I plan my budget when purchasing a second home abroad?

A: You’ll need to factor in costs such as mortgage deposits, legal fees, title insurance and stamp duty (Live and Invest Overseas). To help you calculate potential stamp duty costs, you can use HMRC’s calculator. Consulting a legal specialist and conveyancer can help you understand what your total costs may be.

After purchasing your property, you’ll also need to decide how you will manage it. A property manager can help you maintain the house, manage bookings and look after your rental expenses (Live and Invest Overseas).

Q: How do I get a mortgage on an overseas property?

A: You can apply for an overseas mortgage through your local bank – some UK branches offer international mortgage services. Alternatively, you can apply for one using an overseas mortgage broker. They can advise on what mortgages you can qualify for and help you arrange the details.

Q: How do overseas property prices compare to the UK?

A: Three of the most popular places to buy a property abroad are Spain, France and Portugal (A Place in the Sun).

Eastern Daily Press: Clear Currency offers competitive exchange rates, which can help you save more of the money earned from the rental income on your second property overseas.Clear Currency offers competitive exchange rates, which can help you save more of the money earned from the rental income on your second property overseas. (Image: Getty Images)

A city centre apartment in Madrid is just over 62 per cent cheaper than in London, and basic monthly utility bills are also much less in Spain than in the UK (Numbeo). Affordable homes can be found in the Murcia and Toledo regions (Spain Property Guides).

In France, average living costs are 24 per cent lower than in Britain (Livingcost.org) and an apartment in Paris costs around 13 per cent less than in London (Numbeo). You can find reasonably priced homes in the Dordogne (French Connections).

In Lisbon, a city centre flat is on average 157 per cent cheaper than an apartment in London’s city centre (Numbeo). Bragança and Viseu are considered some of the cheapest cities to live in Portugal (Support Adventure).

Q: How may rising living costs impact your decision to buy a second home abroad?

A: A fall in the value of the pound, and increased prices for energy, food and goods will decrease your purchasing power, meaning you’re likely to get less for your money (Currency Transfer). Rising interest rates may also affect how much you can borrow (L and C Mortgages) meaning it will be important to plan your budget carefully and research your mortgage options.

Q: Do I need to pay tax on a second home overseas?

A: You’ll need to pay tax on any income received from abroad, such as rental income from a holiday home in another country. How much you will need to pay will depend on your residency status and the tax treaties the UK has with the country where your property is located (Investopedia).

Portugal, for example, offers tax incentives and several paths to residency (International Wealth).

If you plan to sell your overseas home in the future, then you may need to pay Capital Gains Tax if it sells for more than the amount you originally paid (The Times).

Eastern Daily Press: In France, average living costs are 24 per cent lower than in Britain.In France, average living costs are 24 per cent lower than in Britain. (Image: Getty Images)

It’s best to consult HMRC or a legal specialist to understand the tax implications of buying a second home abroad.

Q: How has Brexit affected purchasing property abroad?

A: You can still buy a property in Europe, though there are some changes since Brexit that may affect your plans:

  • For stays longer than 90 days, you will need to apply for a visa.
  • As a UK resident, you’ll need to pay the same rate of tax as non-EU citizens.
  • To access state-funded healthcare abroad, you’re likely to need to apply for residency or arrange international healthcare insurance.

Q: How can Clear Currency help you purchase a holiday home overseas?

A: They can provide guidance on the FX tools available to mitigate currency risk, which can help you save money when making international payments. They offer competitive exchange rates, which means you can save more of the money earned from your rental income.

When you sign up for a free account with Clear Currency, you'll get access to their secure online payments platform, enabling you to make international payments safely and efficiently. This can be useful if you are looking to transfer large sums for a deposit, meet mortgage payments and fund your property management services.

Their dedicated currency specialists can help you understand the risks involved with making overseas payments, enabling you to make informed decisions and plan your budget accordingly. Sign up for a free account today. 

Clear Currency is FCA regulated and has a 5* Trustpilot rating.

For more information, visit clearcurrency.co.uk.