We are creeping towards spring, gaining nearly four minutes of extra daylight each day. The daffodils are breaking through with the promise of cheer to come. But the average maximum temperature for the UK this month, 7C, is pretty much the same as it was in December.
You might be forgiven for casting an envious eye towards Europe and thinking of a second home in the sun. You may even fancy a co-ownership model that gives you a stake in several homes across Europe — Nice is nice at 11C in February, with Rhodes at 15C, Lisbon at 16C and Seville at a balmy 17C.
Quite a few of my clients have second homes across the Channel. Often they were bought as a retirement extravagance. With the prospect of no longer working and the kids having left home, they dreamt of being free to take flight for several months.
Many still love their escape homes. But the experience of others is worth sharing for those browsing online, entranced by alluring pictures of terracotta Tuscan tiles, swimming pools and olive trees. The idea is great. But making it a reality can be more of a challenge.
Even before Brexit, buying a second home in Europe was something you did under advice and with care. Tax rules vary from country to country and in some can be brutal. In Switzerland, for instance, if you buy a second home you may be liable to tax based on the hypothetical annual rental value, even if you do not rent it out.
Now the UK is no longer part of the EU, there are new issues to contend with. I have a client whose husband has dementia. Change triggers confusion and stress for him. Historically, the couple have spent six months every year in their holiday home in Spain, but now UK visitors to any of the Schengen area countries — covering most of Europe — are subject to the 90/180-day rule. This means they cannot stay for more than 90 days in any 180-day period.
There are ways around this. In Spain you can apply for a Golden Visa — a residence visa issued to non-EU nationals who make a significant investment in the Spanish economy.
To be eligible you must purchase property (one or more) worth a total of €500,000, make an investment in Spanish public debt of at least €2mn, buy shares in a company or make a deposit in a Spanish bank of at least €1mn. The visa covers your spouse, children under 18 and dependent elderly parents.
The residence permit can be renewed indefinitely, as long as you maintain your investment. And if you plan to live in Spain you can apply for permanent residence after five years of continuous residency — spending at least six months of each year there. After 10 years you can get Spanish citizenship.
Portugal has a similar scheme, though the numbers differ and there are restrictions on where you can buy a property if you are applying for a Golden Visa. Forget a lovely coastal villa. You may find yourself constrained by the regulations to buying in designated interior and sparsely populated areas — living on your own in the middle of nowhere or in areas of poverty.
Back in Spain, meanwhile, the simplest way my clients have found to get round the 90/180-day rule is to go through a bank, depositing €1mn. Not ideal in a time of increasing inflation and with currency exposure in addition — but for them better than moving to a more costly property and enduring all the change that entails.
Other clients have decided to dispose of their properties. But this can present issues, too.
Agents’ fees can be chunky. In France they are typically 5 to 10 per cent, which is negotiable. So haggle, as the seller may find themselves responsible for all of that.
You will have to provide several technical reports to potential buyers and are legally obliged to tell them about anything that may affect their decision to buy — like the dodgy roof and the rotting floor joists. There may be capital gains tax, too.
Be aware that if someone offers the full asking price you are legally obliged to accept it. If you do not, the agent can sue for breach of contract. This can lead to unexpected pressure.
The rules around inheritance can also be an issue in some countries, so it is important to check the requirements for a local will.
This brings me to the issue of timeshare schemes. I have many clients who would like to dispose of theirs. Usually these go back 30 or 40 years, when they were very popular and heavily marketed. I have a raft of clients who inherited these but cannot sell them because there is little or no market for them.
Others are affected on the other side of the equation. Because of the way timeshare schemes work, the costs of maintenance, administration and ownership are shared across the owners. If some owners stop paying their annual charge — going into default — this builds an increasing debt against the property.
Timeshare owners can work together to make a disposal, but this is an added challenge on top of the complexity and costs of selling abroad anyway — which are not inconsiderable, thanks to agents’ fees, legal fees and tax. Where the original owners have lost capacity there can also the complication of having UK powers of attorney recognised in a different jurisdiction.
The lesson is to think very carefully before buying a second home or falling for some of the modern variants of timeshare. Look at the rules around selling when you are buying and consider what happens on your death — remember the rules and tax position may change and will need monitoring.
But if you think ahead and buy smartly, a second home abroad can be a sunny solace to get you through the winter blues.
Charles Calkin is a financial planner at wealth manager James Hambro & Partners