image by williamcho
With the sterling pound near the all time low compared to Singapore dollar, I have been receiving emails from friends back home inquiring about buying properties in London. Apparently, house prices back home are currently at such ridiculous levels that they think it would be more prudent to cash in on the weak pound and take advantage of the more regulated rental market in London instead.
"The brochure on the Canary Wharf apartments looks great," one said. Erm, you mean they look like the Raffles Place back in Singapore? Well, yes in a way but it is not exactly central London if you get what I mean. And if you live in Canary Wharf, it'll probably because you work there. Believe it or not, you would probably be stuck there during the weekends as well.
For most of us, buying a property is a major decision. Trying to buy an overseas property is even trickier especially if you are not familiar with the place. With that in mind, here are 5 common mistakes made when buying an overseas property.
1) Taken in by glossy brochures
Brochures are meant impress and so are the scaled models at the display cases featured prominently in the roadshows. The development in question, be it a fifty storey behemoth or a more modest three storey maisonette, is going to be the sole model in the glass display case, regardless of whether it is but one of the many existing developments in the area.
The sales person is not going to tell you that there is a glut in the area or it is set in a dodgy area where someone was just knifed across the street last month. Instead, he's going to focus on the rental yield and oh yes, the capital gains the property would see in the run up to Olympics 2012, with figures seemingly pulled out from a hat. When asked what is the projection after 2012, the sales person would casually hint that the rich Russians and Chinese would step right in.
Like I said, it's all part of the show. Put the glossy brochure aside and focus on the hard facts instead. Factors to consider when getting a property is pretty much similar regardless of where it is. Things like location, convenience, safety, quality of properties in the vicinity matter too. Press the sales person on that and be prepared to walk away if he tries to waffle his way through.
2) Ignoring the 'overseas' premiums
Given a choice, why wouldn't the developers sell to locals who would probably find it easier to get the required mortgages? Belief me, I'm sure the developers tried. For one reason or another, the locals just aren't that interested enough so let's head overseas instead. That's where you come in.
Now, hosting travelling roadshows requires money. In fact, much more than a local one. Naturally, all this extra costs would be factored into the price and be borne by you, the potential buyer. Of course, this premium would hardly be taken into consideration when the property (once bought) is put up for rental. So take that into account before signing on the dotted line.
3) Caving into ridiculous demands
Curiously, when people are not familiar with common practices where the properties are located, they are willing to put up with ridiculous demands put up by the sales people. These include reservation fees (an option fee) or a demand of payslips, both of which are not common practices in the UK.
Let's be honest, shall we? No properties are worth subjecting yourself to that; the real deals have already been swept up by the insiders, the sales people should be the ones begging you to consider the remaining ones, not the other way round. They need you more than you need them, you are the King (or Queen) here.
4) Not going down to walk the ground
Make no mistake, the sales people with all their snazzy presentation are on commission. In other words, your interests would be the furtherst from their minds. Don't take their word for it. If possible, take a trip down to the actual location and have a look around the area yourself. If you are going to plonk down half a million on something, spending a couple of grand on an air ticket is well worth it.
5) Ignoring local websites
More importantly, search for similar properties marketed locally by the local property agents to get an idea of the value and rental yields. Personally, I would advise heading to Foxtons to have a look. It is common knowledge that their properties are marked up the highest - so something is amiss if the one that you are looking at is priced way above theirs. Not only that, theirs is one of the most comprehensive property agents' websites that I have come across with proper floor plans and descriptions and all. You might just find yourself a more reasonably priced property over there. While you are at it, check out the 4 must visit websites when buying a London property.
Those are the five perils of buying a property in London (or anywhere else for that matter) when you are overseas. Are there any other things to look out for?
Friday, March 4, 2011
Buying a property in London when you are based overseas - 5 common mistakes