Further, in addition to purchase price, you have to consider holding costs when making comparisons. One big factor is property taxes. In Europe, generally speaking, property taxes are much lower as a percentage of property value than they are in the United States.
In Paris, property owners pay two taxes (one is a property tax, the other is an occupancy tax). For my apartment in this city, the total of the two is about .2% of the property value. I pay no property tax for my house in Croatia…not because it's worthless, but because Croatia doesn't charge property tax. Ireland doesn't charge property tax either, at the moment, for residential property. The country is expected to implement one by 2014, but the rate will be low as a percentage of value.
The cost in Europe comes when you make the purchase. Most countries charge a transfer fee from 1% up to 12%. You could consider this an upfront property tax if that makes it easier to bear. Amortize it over the time you expect to own the property, and you'll likely still find the cost works out less than paying the comparable number of years of U.S. property tax.
You're not going to find really inexpensive property in Europe's marquee cities (Paris, Barcelona, Rome, etc.), but this part of the world has a long history and long coastlines. Take out a map and look for small towns near bigger base cities. In these kinds of places you can buy super-cheap and be near enough to a brand-name city to enjoy all it has to offer on a regular basis.
Istria is one of my favorite choices in Europe. The history, the architecture, and the countryside all are enchanting. This region of Croatia has many historic towns, inland and along the coast. I'd say the most interesting is Porec, with its walled old town. For a bigger town, Pula is really the only option, and here you'd find it difficult to find a house for sale for US$100,000 or less. Not so in Porec. The downside for Croatia is that full-time retirement living is difficult, as the country doesn't offer an easy residency visa option.
On the Black Sea coast, consider the region around Constanta. Winters here can be a bit colder than on the Mediterranean, but summer temperatures are perfect unless you're looking for really hot. This region of Romania offers good new construction at really low prices (well under US$100,000), making it a good choice if living in a building built before the United States was a country bothers you.
If neither of these options makes sense to you, again, take out a map. You'll be surprised how many interesting options for an affordable retirement you can find in the Old World.
Lief SimonContinue Reading:
"It's a dismal picture. My advice: Enjoy it to the fullest. Plan a trip to Europe if you can. Vicki and I are putting together a European visit for next May. Or head over to look into buying a house in Spain or Italy, or even Greece. Do your homework now. You'll be ready to move when prices fall further.
"Europeans are suffering. When I say "enjoy it to the fullest," I don't mean to enjoy their pain. I'm talking about taking advantage of chaos, low costs, more competition, and so on. I'll go further and say the best thing we can do for Europe right now is move there, spend our money there, and buy houses there.
"Act now, and you'll be in the minority. In over 30 years of expat life I've noticed a curious phenomenon. When countries sink, the cost of living falls, and opportunity jumps out, foreigners stay home. Call it the chaos effect. Tourists and travelers focus on the chaos rather than the good value.
"Take Mexico, for example. I grew up in southern California, near the border with Mexico. In my youth Mexico fixed the peso at 12.5 to the dollar. But then Mexico's economy tanked, and in 1976 the peso began to float. Mexico had been cheap before, but now it was very cheap indeed. To my surprise I noticed fewer tourists in Mexico, not more. Again in 1982, after default and hyperinflation, Mexico became cheaper. And again tourists stayed home. Tourists returned only in the 1990s when the new peso stabilized at 3 or so to the dollar and Mexico became more expensive. After the last crash in 1993, tourism dried up again.
"I suppose tourists might have stayed away for reasons other than a cheap peso. Then again, those reasons made little sense to me. For example, Mexico's default on its debt in 1982 kept tourists away. I fail to see why bad news for bondholders might be bad news for tourists.
"A friend told me last month she wants to retire to Armenia. She was about to go over there for the second time but abruptly called it off. Reason? She read about problems in Nagorno-Karabakh, which the U.S. government calls an "unrecognized ethnic-Armenian enclave within Azerbaijan." Again, I fail to see the link between problems near the border and this friend's life in a village hundreds of miles away.
"Our friend also mentioned riots in Armenia after the 2008 elections. But riots rarely pose a problem for those who avoid them. Two years ago Vicki and I flew into Thailand during the worst days of the red-shirt street fighting that shut down Bangkok. But we flew into Chiang Mai, hundreds of miles away from the Bangkok riots. As a precaution we arranged for a friend to pick us up at the airport and schlep us directly to his house the first night. The streets quickly settled down, and life returned to normal.
"Years ago Vicki and I visited Chile's beaches during a time of political unrest there. General Pinochet had called a curfew in the entire country because of riots in Santiago, the capital. When we arrived at our hotel in the beach town, we were offered a choice between cheap rooms in the front, overlooking the ocean, or more expensive rooms in the rear. The front, view rooms cost less, we were told, because of noise from the highway below. We quickly snapped up a cheaper room with the pretty view. A 10 p.m. curfew meant we'd hear no noise at all.
"I suggest you profit from chaos in Europe. You've heard the rule for stocks: buy low, sell high. Yet research tends to show that few of us follow the rule. On the contrary, we tend to sell low. When prices hit their lows, it seems everyone is selling. We fear prices will go lower still. Rather than buy we figure we'll wait until we have a clearer picture. Yet the clearer picture somehow never comes.
"For the same reasons, very few of us will take advantage of a cheaper Europe.
"If you've ever thought about moving to Europe, or about buying a house in Europe, I urge you to get over there and look around as soon as you can. If you've put off your long, leisurely visit to Europe, I urge you to plan a trip now. You may move in too early or too late. But at least you'll move. And remember you have something extra going for you. With stocks if you buy too early you're left with a stock that's worth less. But with Europe if you travel too early, well, you still enjoyed a cheaper trip to Europe. If the euro continues to fall, you can return to favorite places and enjoy even lower prices.
"Almost everyone predicts more chaos in Europe, with a further fall in the euro. We all wonder how Europe's mess will resolve itself. But whatever happens we'll likely see a continuing breakdown of Europe's economies. Breakdowns create good times to buy and good times to travel. Put yourself in a position to take advantage."
Kathleen PeddicordContinuing Reading:
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Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.
Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
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