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Venturing abroad

Many Americans dream of owning a home overseas. Even as the dollar languishes in many countries, there's a way to invest wisely.

December 23, 2007|Michelle Hofmann | Special to The Times

Although Peter Mayle and his wife traveled to France as often as they could every year, "during the long gray winters and damp green summers" in England, he longed to return to the vineyards, quiet streets, perfumed olive trees and open-air markets of France's picturesque backcountry.

"It had always been an ambition of ours to get a house there and move," Mayle said. So, in the late 1980s, the couple went after that dream, sold their Devon home and bought a property in the village of Menerbes, about an hour from Marseilles.

They spent the first year renovating the home and getting to know the people, the culture and the language of the region. And the rest is history. In 1991, Mayle's account of the couple's ups and downs, "A Year in Provence," became a bestselling book.

Admittedly, the decline of the dollar against the euro and the pound may make that hillside villa in Tuscany, romantic pied-a-terre in Paris or a shabby chic studio in London's trendy Notting Hill seem out of reach. But if buyers do some research and take their time, experts say, they can be in a good position to secure a home abroad.

The European property market continues to beckon U.S. buyers and residents eager to park their dollars overseas rather than invest domestically. Of the 500,000 to 600,000 foreign properties owned by Americans living abroad, according to a November report commissioned by the National Assn. of Realtors, the most popular locations are Canada, Mexico, Italy, Germany and Britain. And though housing prices in many European countries outpace the market here, when compared with large U.S. metropolitan areas there are deals to be found in Southern and Eastern Europe, experts say.

"You don't get as good a value as you would have a couple of years ago," said Jim Gillespie, president and chief executive of Coldwell Banker. But buyers can spend their time making an informed decision while the dollar has a chance to get stronger.

"Get a feel for if you like the area" by renting locally, Gillespie advised. "And look to buy at the end of the first year."

As with any real estate transaction, said Jonathan Hewlett, director and head of the London region for Savills real estate firm, an impulse purchase can be costly.

Los Angeles resident Judy Moore may not have jumped at the first thing she saw, but she could have taken a closer look around when she bought a five-floor, 1,500-square-foot fixer in Perpignan, France, for about $122,442 a year ago. "The roof, which we thought was in fine shape, was leaking badly after a hard rain and cha-ching, 9,000 euros [$12,964]," said Moore, 54, who lives in the Carthay Circle area of Los Angeles, and designs and manufactures equestrian clothes. She was directed to Perpignan by a friend and former neighbor who also owns a home in the area.

"Then the dollar, which was trading at about $1.30 to 1 euro when we bought the place in December, fell considerably," she said. Last week, it cost about $1.44 to buy 1 euro.

Moore's long-distance makeover has necessitated seven trips so far and a few surprises. Ultimately, Moore plans to spend an additional $144,000 renovating the 14th century European gem to create four apartments for weekly vacation rentals.

Adding up benefits

But with the Mediterranean coast only 10 minutes away, the Spanish border within 30 minutes and a five-minute walk to the local daily market for fresh bread and cheese, Moore remains upbeat. "It's been a fun project."

Why buy in Europe?

Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate, said many boomers are taking advantage of low, long-term interest rates and their increased equity in their principal homes to achieve a dream of living abroad. And with the U.S. market slowing, more Americans also are looking overseas for vacation or investment properties.

For example, U.S. residents made up 5% of London-area buyers in 2006 and 8% as of October this year even as the dollar flagged, according to statistics compiled by Savills.

The 2007 Coldwell Banker Home Price Comparison Index, which compared the cost of a 2,200-square-foot, four-bedroom, 2 1/2 -bathroom home with a family room and two-car garage in 317 markets, found that some good international deals exist but not everywhere.

The study ranked Dublin as the most expensive market, at $2.1 million, outside of North America, followed by Milan, Italy, $1.9 million; Rome, $1.7 million; and Paris, $1.7 million. Bogota, Colombia, ranked as the most affordable foreign market in the study at $140,100.

Although most U.S. buyers purchase a second home in Europe for vacations or retirement, active buy-to-let markets provide another option for investors who can then rent to locals priced out of the market as well as American tourists, students and corporate travelers.

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