I’ve dabbled in overseas property and it’s exciting, but you also have to take into account local purchase tax. If you are going to renovate a property, then you will have to charge sales tax on the market value when you sell it. You can’t expect buyers to pay that tax on top of your sale price, so you will have to absorb that. Sales tax in the UK is 17.5 percent, so be careful about trying to make money out of a renovation, like a barn conversion over there. One good thing, though is that you can offset the VAT element of all of the materials that you purchase.
Overall, unless you’re sleeping with an international tax consultant and can get free advice, I would caution you to stay out of markets that you don’t understand fully. I know the market in Melbourne very well and I know where I can get value in up-and-coming suburbs, but I wouldn’t be so confident in Geelong, or Albury, or anywhere else outside of my home area. Moving money into far away places is an even bigger risk. I only bought abroad once because of other factors – I was in love and stupid!
My main advice, tying in with Terry is that international factors really don’t matter. There could be a terrorist attack in Japan tomorrow or a big bank in Germany might go bust, but if people in Melbourne need somewhere to live, I can still make money regardless of big national statistics or shocks.
The current climate looks bad for those big international cities like Sydney, London, and New York. However, people in those cities will still buy and sell and make money when they know where the hotspots are. I would tell you to ignore international factors like debt-to-GDP ratios and concentrate on local knowledge. If you know a major employer is moving into your area, or if your local school is moving up the league table, then stick with your current property.
Another very good idea is to sell your home and buy off-plan in a new development. Swanky developments usually sell at a premium once they have finished and offer big discounts before they strike ground. Big apartment buildings can take two years from conception to completion and that might be the perfect delay for your situation.