The number of UK households owning property overseas has trebled in the last ten years, reports Grant Thornton...

Leading business and financial advisers, Grant Thornton, have recently published new research showing that the number of properties owned overseas by UK households has almost trebled from 102,000 in 1995 to an estimated 300,000 in 2006.  If this trend continues, there could be around 1.3 million British nationals living abroad by 2025. 

The analysis, undertaken in association with Lombard Street Research (LSR), puts a definitive figure of 2% of the UK population on owning a property overseas and identifies the typical owner as either a pensioner with their main residence abroad, or an affluent person above the age of 45 owning a second home overseas as an investment or as a holiday home. 

Maurice Fitzpatrick, Senior Tax Manager at Grant Thornton commented, "We anticipate that the trend of a gently rising number of people deciding to leave the UK permanently and live abroad (upon retirement) will continue.  If this trend continues at the same rate, by 2025 there could be around 1.3 million British nationals firmly settled in another country and drawing a pension".

Brits buying foreign property increasingly for investment reasons

The Survey of English Housing (SEH) found that investment was a more popular reason for purchasing a foreign property than wanting a holiday or retirement home, with 40% of respondents citing this as their main motivation in buying compared to 38% who were more interested in the lifestyle implications.  This trend of overseas property being purchased as an investment has increased.  In 1999 30% quoted investment as the purpose of their purchase rising to 40% in 2004.

The report closely examines tax considerations for individuals purchasing property abroad, highlighting the opportunities and pitfalls.  In particular, it looks at capital gains tax and income tax considerations if a property is owned overseas, explaining some of the planning options to consider.  The report then looks at how tax systems operate in popular destinations such as France, Spain and America.

Mike Warburton, Senior Tax Partner at Grant Thornton commented, "Purchasing a property abroad has important tax implications.  Contrary to popular belief, you are still subject to tax on your offshore income and capital gains if you are a UK resident and domiciled.  And, if the UK tax system is not complicated enough, the purchaser of a property abroad has to cope with a local tax system that may be culturally dissimilar to our own".

Demand for overseas property linked to fortunes of UK housing market

The analysis finds that demand for property overseas is intrinsically linked to the UK property market, and asserts that given the current level of interest rates and income levels the UK housing market is set for another good year during 2006. However it suggests that there is a danger of  house price bubble in 2008-2009 which would have an adverse effect on demand for property abroad.

The report also points out that demographic changes over the next 10 years could have a positive effect on overseas property demand due to the fact that 70% of the heads of households who own a second home are currently aged 45 and over and in the next 10 years this age group will significantly increase.

Maurice Fitzpatrick, Senior Tax Manager at Grant Thornton comments, "Any continued increase in overseas second home ownership is heavily dependent on the strength of the UK property market and the wealth it generates.  It is this liquidity which influences people in taking the necessary steps to invest abroad.  By 2025 this could mean that 1.5 million to 2 million households in the UK will own a property overseas, an amount which would equate to one-tenth of UK property owners".