Buying property abroad may seem easy but it’s not until you start digging that you’ll discover how differently countries treat ownership. In certain nations, ownership restrictions are completely liberal with foreigners able to buy anything they want. In others, foreigners aren’t even allowed a home in a vacation destination so close to domestic territories that it’s practically in reach. A property on the beach that could be easily purchased by anyone with money a mile away is off-limits to foreigners even within a different region.
It’s all confusing when someone thinks that ownership works universally, but it doesn’t. Some places welcome foreigners and their money with little to no restrictions. Other places make it extremely difficult, or impossible, to buy. There are those countries, however, in the middle, that allow ownership, but with caveats.
Where Foreign Buyers Have no Restrictions
Several popular markets loosen the restrictions on foreign investment. For example, in the United States there are virtually no restrictions on foreign nationals purchasing property aside from unusual circumstances like a property being deemed unsuitable for certain reasons (eminent domain). Foreigners can buy residential and commercial properties freely.
They do not need to be residents to purchase, it’s only later that filing taxes come into question for foreign nationals living and working under a visa and taxes come back into play, estate complications for those who pass on before dealing with their properties. But the purchase itself? Easy enough.
In Spain it’s relatively the same. Foreign nationals can buy property regardless of their citizenship (EU or otherwise), the only hoop to jump through is receiving a tax identification number since there are no property restrictions for foreigners. The same can be said for Portugal, another vacation hotspot where its neighbor to the west has similar trends but without reputable restrictions it’s easy to see why so many people venture there for vacation homes and rental investments alike.
In Canada the laws are also fairly open although certain provinces took it upon themselves in more recent years to impose additional taxes on foreign buyers (British Columbia; Ontario) since they’ve become the hottest buyer class in those areas albeit it’s only additional taxes – not a prohibitive measure, as close as mortgage loans go. Meaning that foreigners can still buy properties there, they’ll just pay more in transaction costs.
Where Foreign Buyers Are Surprised by Restrictions
Then there are countries with far more restrictive measures. Thailand is one example where it’s complicated: foreigners cannot own land; that’s the bottom line. But if they try hard enough, they can procure condominiums if, at the time of purchasing, the building does not exceed 49% foreign ownership of its total floor area. So you might find a condo you’ve always wanted only to discover the day you’re ready to purchase that another foreigner has already taken their share.
Additionally, some buyers look to work around these regulations by establishing long-term leases on properties or creating Thai companies that will hold property for foreigners. These are gray areas due to legality but establishing long-term leases is the more substantive way to go although it means foreigners don’t own the condo, just have rights to use the land for a specific amount of time, and essentially an expensive, long-term rental. Leases tend to go for 30 years with renewal options after, but renewals are never guaranteed so caveat emptor.
Mexico has similar restrictions at borders and coastlines where foreigners are legally prohibited from direct ownership when they try to play it that close; specifically within thirty miles of coastlines or sixty miles of international borders as the bird flies, which constitutes most desirable real estate developments on the coast.
However, they can utilize fideicomiso, a bank trust wherein foreigners are granted beneficial rights, one would think that operates similarly as ownership but it does not; it’s treated differently under legal context and has annual fees and needs renewals.
Where Approval is Needed
Australia takes a more complicated approach: foreigners can buy properties here, provided that they get approved first, from the Foreign Investment Review Board of Australia. If you’re wondering can I buy a property in Australia as a foreigner, the answer is yes, but only if you’re granted permission.
In Australia, new properties and established properties require different levels of approval, new properties are easily granted since officials want to increase supply whereas established properties face much stricter scrutiny. This is especially true for temporary residents who may get approved for one existing dwelling but are obliged to sell upon departure.
Not getting approved puts pressure on buyers because approvals take time, application pages must be filled out with information about both buyer and intended property, application fees must be paid depending on property value, all without any sort of guarantee.
What Ownership Means, Practically
Aside from outright restrictions is what ownership means legally. In British common law countries like Australia freehold ownership is often possible whereby you own the land plus any improvements forever. But other countries have different systems; leasehold arrangements are common in Asia which allow leases between 30 years and 99 years with extension options (or even longer).
Once a lease expires it reverts back to the freeholder, this becomes tricky toward property values since when there are 80 years left on a lease the value of property diminishes over time, 999 year leases will be worth more than those with 30 years left until expiration.
Countries like Vietnam technically don’t allow private ownership, there’s no private land ownership, even for citizens, which means that whether what a foreigner sees that’s similar is not what is arranged as a long-term land use right but since foreigners in Vietnam have their specific rights shorter than citizens’ rights, there’s more denial than anything else.
Where Problems Arise From What’s Supposed to be Practical
These rules create problems when it comes down to actually buying something. Financing becomes trickier, foreign buyers who step into countries with ownership restrictions that make it difficult get turned away by lending banks, home banks also don’t want to lend money for real estate development either so buyers have to figure things out on their own meaning more cash up front or finding specialized financial firms that provide international lending at higher interest rates.
Insurance becomes increasingly complicated as well; those with properties abroad who want coverage need insurance companies who will operate internationally and inside whatever country’s regulations, in most cases your home country’s insurance will not extend.
Ultimately what happens when something goes wrong? You have to deal with that country’s court system, and legalities, whereas if you had something wrong with property in your hometown you could resolve it quickly. Complications arise which result in immense time and expense.
Tax Complications Nobody Warns You About
Legal realities affect taxation realities that aren’t common sense right off the bat. For example; many countries tax foreign property owners differently than they’re own residents, higher transaction taxes apply no matter the legalities and thereafter certain annual property taxes do not reduce ad valorem totals where there would normally be a non-resident applicable discount; capital gains taxes operate based on foreign owners deeming them less favorable than other citizens.
But here’s what’s shocking: you’re probably dealing with tax issues between multiple nations; wherever property lies will want its piece of rental revenue plus whatever cut it’ll take when sold later down the line whereas your home country will probably want foreign assets disclosed too which means worldwide income applies unless tax treaties exist between countries which gives foreign owners a leg to stand on to avoid double taxation, but avoiding double taxation is futile if you don’t have professional assistance because this costs extra money.
Many countries require annual reports from foreign owners or insist on local bank accounts found within them; failure to comply results in penalties or challenges when you finally want to sell one day without putting your life savings on the line. There’s an administrative burden that cannot be underestimated when it comes to owning abroad legally, practically, and financially, not everyone advises it when it’s all said and done.
What it All Means
The reality about foreign ownership rules runs deeper than regulations; there’s an economic philosophical component concerning ownership which illustrates housing affordability concerns, resource discussions, economically sovereign nations wanting respectability no matter what’s driven by population demand (if people can’t afford anything in their own country then what’s their motive in asking foreigners) and why such private measures exist.
They’re not arbitrary, they’re policy choices made over time for particular reasons, and while navigating them may seem misguided from one country to another there’s a reason why they’re all so different.
Anyone interested in any substantive ownership abroad should carefully research what’s legal per country currently. Regulations change quickly, especially when markets are volatile with prices or heavy foreign investment.
What was allowed five years ago might not be allowed today, even though someone’s trusted banker fifteen years ago may have found this loophole for them last time they visited somewhere special, and getting legal advice from someone who legitimately operates inside that country isn’t just warranted, it’s necessary to avoid expensive mistakes that tie your cash up in something you cannot control, or sell one day easily.
