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Dreaming Snowbirds Warned To Make A Reality Check
Growing numbers of Britons are retiring abroad, swapping the cold and rain for mostly warmer climes. No wonder that they are now known as “snowbirds”.About 1m British pensioners are drawing their state pension abroad, according to the Department for Work and Pensions. This is up from 770,000 in 1997.
Britain’s former imperial reach explains part of the pattern with Australia accounting for 241,000 and Canada for 151,000. But sunnier European destinations have a strong appeal with Spain accounting for 71,000, Italy for 32,000 and France for 31,000.
“There has been a shift from a second home for retirement being regarded as a luxury to it being something attainable by most people with the drive to achieve it,” says Liam Bailey, head of residential research at Knight Frank, the estate agent.
In 1995 the average price paid for a second home overseas was 165 per cent of the average UK property price. By 2005 it had fallen to 90 per cent, reflecting in part steeper house price inflation in the UK but also the fact that second homes had become more of a mass market aspiration.
Internationally, recent rapid growth in house prices has slowed, according to the global house price index launched last month by Knight Frank. The average house price globally rose an annualised 6.1 per cent in the first quarter of 2006 compared with 10.9 per cent in 2004. But the news for Britons selling up to retire to the Mediterranean is not so positive. Spain rose 11.6 per cent while France was 9.3 per cent higher compared with an increase of only 5.3 per cent in the UK.
Despite recent unfavourable price trends, the impact of growing prosperity, cheap flights and the low cost of borrowing – even lower in the eurozone than in the UK – mean the trend for retiring abroad is expected to accelerate.
In countries such as the UK and Germany, retired people will probably outnumber the young in a decade or so. If money were no object, 22 per cent of Britons and 35 per cent of Germans would be certain or likely to retire overseas, according to a poll for King Sturge, the estate agency. On present numbers of over-65-year-olds, this would mean 2m UK citizens and 5m Germans would be seeking to retire overseas.
Five per cent of Britons – equivalent to 2.2m people – already own a home abroad and that number is set to double, research by Barclays shows. Many of these homes will be holiday homes or buy-to-let properties but experience of short spells abroad could pave the way for owners deciding to use them for retirement later.
“We deal with a lot of people in their mid-40s who want a second home for summer fun or a buy-to-let property with an element of own-use which they could retire to later,” says Mike Boles, head of the international division at Savills Private Finance.
Many of the favoured countries for would-be purchasers are the traditional destinations of Spain, France and Italy. But other countries are proving popular following the opening up of eastern Europe and the growing popularity worldwide of second-home ownership.
Bulgaria, Croatia, Dubai, Morocco and Egypt appear among the top 10 destinations favoured by overseas home buyers, according to Savills. But some have their limitations for retirees. “People want a good quality of life, good food and good medical services,” says Boles. “You can’t necessarily get that in Bulgaria and Croatia. You go where it is safe when you retire, not where it is exotic.”
So how should you select a retirement destination? Start by weighing up advantages and disadvantages, says Age Concern, the charity. This may sound obvious but it is easy to be swayed by memories of short summer holidays that bear little resemblance to year-round living.
Age Concern asks: are you planning to live overseas permanently or just for part of the year? Do you plan to return to the UK regularly to visit friends and relatives and for medical appointments? How will you cope living far away from family and friends?
Can you afford to retire abroad and what will your future income be? Sterling has been strong recently but foreign currency markets can be volatile and a falling pound would hit your income. How will you cope living in a foreign culture and climate full-time? Some people are happy to depend on a large local expat community for support while others try to merge in with the locals: which are you? How would you cope with the death or serious illness of your spouse or partner?
Age Concern advises people planning to retire abroad to visit the country of their choice at different times of the year. “Your needs as a resident will be different from your needs as a holiday visitor,” it says. “If you know someone who has already moved there, ask them about the things you are interested in.”
Mastering the local language will not only help you settle in, gain access to services and deal with emergencies. It will also add immeasurably to the pleasures of living abroad and allow you to get much closer to the locals.
Retiring abroad will determine how you live for many years to come. So don’t rush into any decisions, is the advice of Mark Dampier, research director at Hargreaves Lansdown, a financial adviser. “Wait after retirement before making any big changes,” he says.