A strong pound, escalating UK house prices, steep taxes and flexible pension rules – for Brits approaching retirement age, the case for a move abroad would appear to be getting stronger.
Conditions in 2014 mean, when downsizing, your money goes a lot further in Europe, thanks largely to house prices in the UK rising while foreign property markets remain depressed, with the added benefit of the exchange rate continuing to favour British buyers.
Conditions in 2014 mean, when downsizing, your money goes a lot further in Europe
The Overseas Guides Company recently encountered a British owner of a property in Portugal’s eastern Algarve who would need to sell up in order to buy a house back in the UK with his wife.
The couple currently rent their home in the UK – having moved back from Portugal some years ago – but the combination of Portugal’s flat market and the UK’s booming prices means they’d struggle to afford what they wanted in the UK.
For them, a luxury, four-bedroom villa in Portugal with pool, gym and garden would equate to a semi-detached house or flat in their preferred town on the Hampshire coast.
Meanwhile, the couple’s mounting reservations about selling their home in Portugal will be intensified by the OECD’s recent report that said UK houses were 30 percent overvalued but Portugal’s were undervalued.
Elsewhere, for anyone looking for a way to subsidise an overseas retirement and at the same time keep hold of a sterling asset, investing in a buy-to-let property before leaving the UK could make perfect sense.
Reassuringly, a hike in rental demand in the UK is expected now that new regulations governing the granting of mortgages have been introduced.
The Mortgage Market Review, which came into effect on April 26, made the conditions for securing a mortgage tougher, meaning more people could be forced to rent their home in the UK, until they are able to satisfy the new conditions for a mortgage.
Then there are changes to the pension rules that will come into play in April 2015, giving retirees the freedom to spend their pension pots, albeit with tax levied, on whatever they wish, including a home abroad or buy-to-let.
And it’s not just the sunshine that makes living abroad an attractive proposition to British retirees. Considering that council tax and taxes on life’s little luxuries are considerably less in typical European expat hot spots, such as Spain, France and Portugal, than in the UK, relocating could have financial benefits for many retiring Brits.
Careful pension planning, including making use of off-shore pension vehicles, could bring down an expat’s income tax too, putting more money in their pockets to enjoy their life in the sun.
And what of the exchange rate? After steadily climbing since the start of 2014, the value of the pound against the euro is back to levels not seen for around 18 months. This is great news for anyone on the verge of buying a property in the Eurozone who has their funds in pounds still.
To put that in real terms, rewind a year, and a €200,000 property in Spain or France would have cost approximately £7,000 more to a UK buyer than it would today. Why? Back in mid-May 2013, the interbank exchange rate was around £1/€1.18, while this week the rate is hovering around £1/€1.23.
Richard Way is the Editor of The Overseas Guides Company, 0207 898 0549.
