The Secret To Affording Retirement In Europe
Nov. 9, 2012, Panama City, Panama: Europe can be a much more affordable retirement option than you might think if you focus on smaller towns rather than brand-name cities.
Dear Live and Invest Overseas Reader,
Kathleen's blog this week for U.S. News and World Report detailed five apartments in Europe on offer right now for less than US$100,000. Indeed, you can find many good options at affordable prices in Europe, which generally surprises people.
Of course, if your only goal for retirement is a cheap place to live, you could find options anywhere, including in the United States. Houses for less than US$50,000 can be found in every state (no, I didn't personally check for all 50, but I believe this is a fair statement). The question is whether or not you would want to live where those houses are located. I'd say that a quaint apartment in a small coastal town in Europe is a more interesting retirement option than a house in the middle of nowhere or in the crime center of some non-descript city (the most likely places to find super-cheap housing in the States).
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.
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