Financial Perspectives

Although not too many people are doing it at the moment, this is probably one of the best times to consider buying an overseas property as prices are generally rather more depressed than they normally would be. Having said that there are lots more people selling or at least trying to these days which in itself brings up similar issues.

For a start there’s the different legal system to consider. Even if you’re European and buying or selling in another European country you can still find that, although illegal, the local authorities will retain some of the proceeds of a sale in case it turns out that you owe them any taxes. It’s worth pointing out to the legal person dealing with your sale that they are legally required to treat you as though you were a national of the country and that applied even if you fully intend to take the proceeds abroad afterwards so long as it’s to another European country.

Obviously with a property investment you can be talking in terms of quite substantial amounts of money and if you’re going to be changing currencies then it’s worthwhile looking into your options to reduce the costs of exchanging the money to the other currency and also of reducing the risk to you of there being a substantial move in the exchange rate. For example, this year the pound/euro rate has moved from around 1.10 to around 1.20. Ten cents doesn’t sound like much but if you’re looking at a typical property of around the EUR 300,000 mark that’s EUR 30,000 of a difference which is enough to cover legal fees with change or think of it as the swimming pool that you quite fancied.

How do you reduce these charges and risk? If you go to your bank as most people do you are likely to be hit with the maximum charge possible although the charge can be even higher if you just use the local legal people to send you the proceeds as they’ll add charges on top of that. The best way is to go to one of the specialist money brokers who can shave 5% or more off the charges that the banks apply and can also arrange to fix the rate you’ll get months in advance which eliminates the uncertainty in the amount that you will ultimately receive. Aside from the charges from the rate fix, there are no downsides as if the exchange rate moves in your favour you can let the fix lapse and exchange the money at the current rate.

On non-financial matters don’t neglect the time delays inherent in overseas moves generally. Not only does the money take longer to arrive (unless you just take it as a suitcase full of cash which is quite legal though may raise a few eyebrows), but it’s obviously going to take longer for the removal truck to move your stuff from A to B. There aren’t any formalities required in moving your own stuff around Europe although expect checks for illegal immigrants at the ports and be sure that the lorry doors are secured with a padlock (most aren’t) to avoid a few questions along the lines of the “have you packed the case yourself” familiar to air travellers.

It’s best to plan the move more carefully than you would for a normal domestic move as you’ll appreciate from the above that there are a lot more places that complications can arise.

With the world economy falling apart around us this is one of those times where many people wish that they had invested in gold as, of course, with everything else falling gold is doing quite nicely as usual.

The key thing is to keep your savings and investments diversified and moreover to keep to a regular savings and investment programme. If you’re doing that, it shouldn’t really matter whether the price of gold is sitting around the $200 mark or if it’s sitting at the $900 mark since, as with all investments, it’s pretty much impossible to hit the bottom of the market when you’re buying and it’s equally difficult to hit the top when you’re selling. That said, the gold price is currently off the top achieved in May.

But if you’ve decided to buy some gold bullion for a rainy day, how do you go about it? In principle there are all kinds of investment schemes around these days which let you buy a share in a pile of gold and that’s a sensible way to go about it in that the costs are lower than they are if you some gold bars. However, that lower cost comes at a price, namely that you’re trusting that some intermediary actually has that piece of gold for you and that, should they go bankrupt, that you’ll be able to get your little piece of gold. Certainly these firms have all kinds of reassuring things to say about that but at the end of the day, to my mind, there’s nothing to beat having a lump of gold in your hand.

If you’re aiming at looking after the gold yourself it’s relatively easy to buy it these days by way of Bullion by Post who offer the usual range of investment sizes of gold bars. In terms of bars, the smallest that you can get is the one ounce bar which weighs in at around £600 these days (the price varies throughout the day) or you can get the one kilo bars that you see in photos of Fort Knox and the like for around £19000. The larger bars carry less of a premium over the spot price for gold (ie they are cheaper per ounce of gold) but unless your portfolio is really large the larger bars aren’t going to be terribly practical purchases for you.

One thing to bear in mind if you’re collecting these things in your house is the security and insurance aspect. Clearly if you are stockpiling gold in your house you’re building up a major asset and your insurance company would want to see it adequately protected. It’s possible to avoid this hassle by using a safety deposit box in your bank which will save on the insurance and you may be able to get it free too depending on your bank.

If you’re selling property outside your home country it’s easy to fall into the trap of pricing it in the local currency and then forgetting about it.

That usually works fine if property sales in the foreign country move at a fairly brisk pace but often they move at a much more sedate pace than you are accustomed to. Whilst exchange rates between the major currencies rarely move quickly they do move and over a period of many months the price translated back into your home currency can change quite substantially.

For example, take a property that you wanted to sell for £60,000 at the start of 2007 and you therefore priced it at EUR 90,000 (£60,641). By the start of 2008 you could sell that property for EUR 85,000 and pick up £62,553. You might think that a year is a long time to have a property on sale but in many European markets property sales proceed at a very sedate pace and it’s not unusual to have a house for sale for quite an extended period before you find a buyer.

If you are counting in your home currency it can often pay to check whether or not you can lower the local price but still collect the same amount of money as obviously it can speed up the sale of the property.