Foreign currency and other money matters affecting buyers of overseas property
Money makes the world go around, they say, and it is certainly true that when you are buying overseas property, living abroad or simply jetting off on your holidays, you need to have ready access to funds, either in Sterling or foreign currency. Money customs, laws and availability may be very different from the UK in the country you are visiting or where you own overseas property so be sure to research the local conditions.
Foreign currency and living abroad go hand in hand
When you own overseas property, whether it is your holiday home or you are living abroad permanently, you will have to look at the best ways of exchanging Sterling for the relevant foreign currency. Most foreign currency can be bought in the UK, at banks, the Post Office, and at Bureaux de Change offices. But some foreign currency ie the Dirham in Morocco, can only be purchased when you arrive n your destination country.
In certain countries you need to inspect the notes offered to you when you buy foreign currency and when you receive change in shops. In Dominican Republic, for example, peso notes that have anything written on them are classed as ´defaced´ and are not accepted in stores. Vigilence will also be required by those buying foreign currency in Romania in 2007; four zeros were dropped from the currency two years ago and the old notes will cease to be legal tender at the end of 2006.
Owners of overseas property should know the local currency restrictions
The majority of countries do not impose restrictions on the amount of foreign currency or local currency you may arrive with. But some do, including some EU countries. Italy is one such. It allows a mixture of both Euro and foreign currency up to a value of Euros 10,329.14!
Currency restrictions are more common on departure. Lithuania, for example, insists that the export of local currency and foreign currency over certain limits (5,000 and 40,000 Litas respectively) must be declared. Investors in overseas property and anyone living abroad should familiarise themselves with the local law.
Credit and debit cards are not always common currency
While the plastic-fantastic may reign supreme in western Europe and the States, some countries have not fully embraced the credit and debit card culture. In the majority of these cases, credit and debit cards are usually accepted in hotels, restaurants and the larger stores of tourist areas and major cities. ATMs, usually with multi-language options, are readily available in most large cities. However, if your overseas property is in a remote area or you are living abroad in a still-developing country, you will usually need cash (nearly always in the foreign currency, not Sterling) for all your everyday transactions.
Living abroad is no escape from VAT
Purchase tax, Value Added Tax, Sales Tax - call it what you will, some form of nationally-collected tax is involved in the majority of transactions around the globe. Not only does the rate of tax vary depending on the country, it may also vary (unlike in the UK where VAT is a uniform 17.5%) according to the goods or services offered. If you are planning on living abroad or are visiting an overseas property you need to budget for the local sales tax which is often not included in quoted or published prices but added to the bill at the point of purchase.
Travellers´ cheques are secure but not always convenient
Sterling, US Dollar or Euro travellers´ cheques can be bought in the UK and converted into foreign currency as and when you need cash. While travellers´ cheques are a secure option, they are not always a convenient method of carrying funds whether you are living abroad on a permanent basis or just visiting your overseas property for holidays. Do your research before buying travellers´ cheques. Expat internet forums are usually a good place to find out how convenient or not they may be in the relevant country.
Living abroad usually needs a local bank account
Most purchasers of overseas property, and most Brits living abroad, find they need to open a local bank account. The process of opening an account is not usually difficult or slow, but you may need help in completing the application forms if you don´t speak the local language. You may need some or all of the following documents:
- Your passport
- Your birth and/or marriage certificate
- Several copies of passport photographs
- Proof of where you are living abroad (and possibly in the UK also)
- Proof of your status in the country ie employed, retired, student etc.
Official banking hours vary enormously from one country to another. Even within Europe, where they all open Monday to Friday at least, there is no uniformity of hours. In most Muslim countries typical banking hours are Saturday to Wednesday plus, sometimes, Thursday morning. Check with the embassy of the country where you are buying overseas property.
Investigate the economy of your destination country
Social conditions and housing markets do not operate in vacuums; they always reflect elements of the local economy. So whether you are buying overseas property, visiting on holiday, or planning on living abroad, it is useful to do some research into how the economy ticks and its general direction.
Information can be found from a number of sources. A good starting point is the embassy of your destination country. More impartial details may be found in the BBC´s country profiles which can be accessed at http://news.bbc.co.uk/1/hi/world/default.stm, while more detailed economic analysis is available for 30 countries is published by the Organisation for Economic Co-Operation and Development at www.oecd.org.
If your plan for living abroad involves finding work, a country´s unemployment figures can be indicative of both your likelihood of success and of wider social tensions. It is also important to know about recent and current inflation rates as rising prices may not only impact on the value of your overseas property, it will certainly affect your household budget. So, too, will an unstable foreign currency. Also, it is useful for investors in overseas property to know whether tourism is a significant local industry, as this is often where most rental income comes from. Look, too, for imminent labour, economic and social reforms that may impact your enjoyment of either living abroad or owning a local property.
