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Buying a holiday home in Europe: What to be aware of

The purchase of a holiday home in one's own country or in a neighbouring European country is more interesting than ever. This means that the owners can expect to enjoy the same comforts that they would have at home. The holiday home reflects their personal style and guarantees a pleasant holiday with all the amenities they are used to. Furthermore, leisure real estate in Europe can also be seen as a capital investment. Because low interest rates make for favourable financing. At the same time, the properties can potentially increase in value and generate additional income from their rental. Property prices in most hotspots in Europe have been rising steadily for years and promise attractive returns in the context of short-term rentals. Buying a holiday home in Europe can therefore be just as attractive for your own holiday as it is as a capital investment: To ensure that the foreign property optimally fulfils all requirements, there are a number of things to consider when buying.

- Buying a holiday home in Europe: What to be aware of

Buying a dream holiday home for own use

If the holiday home serves exclusively as a private second home, it should totally satisfy the owner's requirements. In this case, any property and location that appeals to the buyer is fine. Whether the property abroad is a romantic old apartment in the narrow streets of an Italian town or a unique luxury property in one of the hottest holiday destinations in Europe is a matter of taste and the amount of capital to be invested. Passionate skiers may prefer a ski-in ski-out holiday property in Austria, while golfers may prefer an apartment on a Majorcan championship course. Some enjoy the sun on the feudal beaches along the French Côte d'Azur, while others appreciate posh real estate in Monaco. When it comes to holiday homes in Europe for own use, the motto is: Do whatever you want.

Letting a holiday home in Europe: It' s all about the location

But things are a little different if the property abroad is intended as an investment and is to generate a return by being rented out. The better known a holiday destination is, the higher the demand for holiday homes and the easier they are to rent out. Waterfront properties on the Baltic Sea or Lake Starnberg are more expensive than properties in rural areas off the beaten track. But the better the location and the more the resort has to offer, the more willing tenants are to pay higher rents. Furthermore, attractive holiday properties in prime locations are an interesting investment. 

After all, a holiday property with a beautiful panoramic view in the Swiss town of Ascona is likely to see a higher property price appreciation than one in a village location or on a busy main road. When buying investment properties, the needs of the target group must be taken into account in addition to one's own interests. If the future tenants are arriving by plane, train or car, the property should be conveniently located. If the preferred tenants are looking for privacy and tranquillity or an active nightlife, this will significantly influence the decision on where to buy the property abroad. If a mixed use of investment property and holiday home for own use is envisaged, a property in a prime location will usually meet all requirements.

The building fabric in Europe: Not all apartments are created equal

When looking at an impressive glossy brochure for a new holiday resort development, it is often not possible to draw a realistic conclusion about the building fabric. After all, not all countries in Europe build to the same high standards as Germany. In southern European countries in particular, elaborate insulation and efficient heating systems are uncommon. Elegant historic buildings in attractive locations in Europe's holiday destination can be quite captivating. Their building fabric may be good or the holiday apartment may already be in need of renovation. If you are not an expert, you should rely on the experience of appraisers and real estate agents with expertise when buying an apartment in an old building. 

Many of the European neighbours do not place much importance on energy savings when building a holiday property, which can quickly become noticeable when paying the utility bill. Therefore, the question arises for prospective buyers whether it is perhaps better to purchase a holiday home for first-time occupancy in the early construction phase. Because this will allow you to realise your own preferences. Alternatively, you could also consider building a new holiday home. But in many countries, this is not always easy for foreigners. Experienced real estate agents are familiar with the property market and the approval procedure at the respective holiday destination and can advise prospective buyers accordingly.

Particularities when buying a holiday home in Europe

Buying real estate in your own country is relatively easy. But buying real estate abroad is a slightly different matter. Because depending on the country, the foreign buyer has to observe different rules and regulations. While in Germany a notary has to certify the purchase of a property, in other countries an informal written purchase agreement between buyer and seller is sometimes sufficient. Accordingly, there is no control by an expert who knows and takes into account the legal particularities of the respective country. When buying a property in Europe, prospective buyers should therefore definitely consult independent advisors such as lawyers, notaries or competent real estate agents before signing the contract. They know the local customs as well as potential pitfalls in the purchase contract. If you do not speak the local language, you will also need an accredited translator for all discussions and contract negotiations. Often the consultants in the resorts are multilingual, which facilitates communication.

Checking the legal requirements before buying a holiday home

It is essential to check the documents of the property you wish to buy, such as the building permit and the land registry entry. This is the only way to avoid being overcharged due to a lack of knowledge about the particularities of the respective country. In some holiday regions in Europe, foreigners first need to obtain a permit before buying a holiday home. In Switzerland, there are some restrictions on the purchase of real estate depending on the region and nationality of the buyer. In Austria, vacation rental ordinances may exist that require property owners to rent out their holiday homes. In Spain, buyers must first apply for a tax number, the so-called NIE, before they are allowed to sign purchase contracts. In all countries it is important to make sure that the foreign property is free of encumbrances and that the purchase is legally watertight. The experienced Engel & Völkers real estate agents at the top destinations in Europe are familiar with all the procedures involved in buying a holiday home and speak the local language as well as the languages of their clients.

Is there tax liability when buying a holiday home in Europe?

In principle, a tax liability in Europe always exists where the income accrues. In the case of letting a purchased holiday home in other countries of the European Union, this means that no tax liability arises in Germany as your home country. For a holiday home in the Netherlands, for example, the income from letting is taxable at the Dutch tax office. In fact, this income does not even have to be mentioned in the German tax return anymore. The only exception in the EU is Spain. Income from the letting of real estate in Spain, the Balearic Islands or the Canary Islands is still subject to progression. When buying a holiday home in European third countries such as Switzerland, on the other hand, the income must be declared in the German income tax return. 

Depending on the double taxation agreement, this may trigger a tax liability in Germany or only in the country where the holiday property is located. If the property was purchased in Europe exclusively for owner-occupation, it is generally income tax-neutral. However, property owners may be subject to wealth tax for a holiday property in Europe in the respective EU country. Also to be taken into account is the land transfer tax, which may be higher or lower in other countries than in Germany. Before buying a holiday home in Europe, prospective buyers should therefore clarify in detail the tax aspects that apply to them personally.

Other incidental costs that may apply for a European holiday home

When buying a holiday home, there are various additional costs depending on the holiday destination. This includes one-off expenses such as brokerage fees, costs for lawyers, notaries and translators as well as fees for necessary official permits. If the property is outside the euro area, currency fluctuations can have a significant impact on the purchase price and the monthly utility costs. Furthermore, the maintenance of the property abroad also costs money. In addition to electricity, water and heating, there are other charges for holiday homes abroad, similar to those for owner-occupied apartments in Germany. This includes care and maintenance of communal facilities such as the pool, playgrounds and sports facilities. But also services such as cleaning of the hallways, gardeners or a concierge service can be charged monthly for holiday homes. These charges apply regardless of whether the property is vacant or rented out.

Holiday property in Europe: Buy with your eyes open 

Europe has many fantastic holiday destinations, picturesque landscapes and world-famous hotspots. Buying a holiday home by the sea or in the mountains is often a lifelong dream come true. To ensure that the property will serve as a base for unforgettable holidays for many years or even decades, you need to be prudent when making your purchase. A pleasant holiday atmosphere should not get you to rush into buying a property unchecked out of a mood. Buying a property in Europe is an investment that should be just as well considered as buying a primary residence in your own country. Each of the beautiful holiday regions in Europe has different requirements for buying a property. Each of the beautiful holiday regions in Europe has its own regulations governing the purchase of real estate. The way that holiday homes are built abroad may differ from the way they are built in your own country. For this reason, the building fabric of many properties is not always easy for prospective buyers to assess.

Engel & Völkers real estate agents are at home in Europe's hotspots

The regional Engel & Völkers real estate agents are based in the top holiday destinations in Europe. As experienced real estate experts, they are very familiar with the regional particularities. They are able to assess the value and condition of a holiday property accordingly. As multilingual intermediaries between seller and buyer, they also overcome all language barriers and assist with administrative procedures related to the purchase of the holiday property. Our brokers will be happy to recommend other local experts to answer any tax or legal questions that may arise. This makes buying a holiday home in Europe what it should be - the realisation of individual holiday dreams.

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