Relocation stories: Lucas Fox talks to architect Mark Roche about relocating from London to Catalunya
TS: You sold your architecture practice to make the move to Spain and bought two properties – one in Barcelona and the other in the Costa Brava. Is there anything you would do differently if you were to do it again?
MR: I sold my architectural practice at the age of 48 and took early retirement in order to look after my elderly father. I can honestly say had I worked until the age of 65 (I’m 61 now) I would be terrified of the idea of having nothing to do all of a sudden. But because I stopped work so early I took up hobbies, was able to do unpaid work occasionally for friends, and took up a guest lecturing position for a few days a month. My retirement was really a gentle decline of having to do less of the things I had to do, and more of the things I wanted to do. I am often asked “don’t you miss work?” which is usually accompanied by “I love my work”. My response is always the same. I love architecture, but work was not something I love, love was reserved for family and friends. I never had a problem giving up work. Taking an early retirement made me think about where I was living and after my father passed away I hankered after a sunnier climate. The only hindrance was to convince my younger partner and my teenage stepdaughter to share my curiosity and do it with me.
TS: As an architect, what sort of properties were you looking for once you got to Catalunya and why?
MR: One of the architectural icons I consider near the very top of my list is the Barcelona Pavilion by Mies van der Rohe. It follows that the properties I like are modern in style. The houses I viewed were more often than not bespoke houses designed by an architect, not ones that were built by a developer. Both of the houses I eventually purchased were bespoke, one-off, unique designs.
TS: What makes Catalunya special in terms of property?
MR: Catalunya has an amazing coastline, dramatic mountains and distinct climates. Nature and vistas impact heavily on the buildings here. It has a great legacy of Spanish designers and more recently the Olympics spilled over to being one of the greatest regenerations of a city centre in Europe. Vibrant and cultural are well-used adjectives that describe living here and of course it has an impact on family life as well as the built environment. So yes, it is really a special place for many reasons.
TS: What are the advantages of buying a property to renovate rather than one ready to move into?
MR: Of course there are huge advantages to building a ‘dream’ property or renovating one to meet one’s own needs. But from my experience of working with clients I believe the key to success in such a venture is timing. Creating a bespoke property at the same time as moving to a foreign country with a different culture, language and way of doing things is not a challenge I would dare to make. Even as an architect I chose to purchase a ‘ready to move into’ property so that my family could adjust and get acclimated to the area before committing to renovating a house or building something new. There will always be a place and time to do that in future.
TS: One of your properties is a short-term-rental. How have you found this to be in terms of an investment against a home you live in full-time?
MR: As I need an income to top up my pension we decided to buy two smaller houses rather than one large house and to use one for rental income. The house in the Barri Gòtic was initially the investment property and the house we bought in Tamariu was where we decided to live. We liked the idea of being able to divide our time between the city and the sea, and we enrolled our teenage daughter in a local school in Palafrugell so most of our time is spent in Tamariu.
The upper floors of the Barcelona house were rented to tourists on a short-term basis and the architect who designed the house used the ground floor as his office, which we still rent to him. I received a reasonable return and enjoyed the added benefit of using the upper part of the house for my family and friends when it was not rented. Unfortunately and inevitably circumstances change. The house did not have a tourist licence and so when the Town Hall started to crack down on illegal tourist rentals with hefty fines, I had no choice but to stop renting the house on a short-term basis. But I was very lucky to have purchased the two properties because this provided the flexibility to meet the circumstances. We now rent the house in Tamariu through Lucas Fox during the summer months and use the house in Barcelona much more.
TS: What pitfalls should people look out for if they are planning to do the same thing?
MR: It is difficult to take into account all eventualities. As with most investment decisions these need to be made primarily with your head and only partly with your heart. This requires you to do your homework and, without question, seek legal advice when purchasing a property in Spain as well as the advice of an accountant. Paying taxes in Spain is difficult to fathom especially if you continue to have income from the UK or elsewhere because the tax years are different. Having an accountant who understands both tax systems is advisable and I’m still working on that even after two years.
Also, get a survey done before you buy a property. Even though the house I purchased in Tamariu was only four years old and I am an architect, I wish I had done a full survey to uncover any hidden defects.
Lastly, the climate in Catalunya may at first appear benign – it is not. The winds and rain can be ferocious (and exciting) at times. The yearly rainfall in Barcelona is the same as in London, but Barcelona enjoys 300 days of sunshine a year. You can work out that when it rains it rains heavily and this takes its toll on properties especially if they are by the sea.
TS: What would you say are the most important lessons you’ve learned along the way?
MR: The most important lessons I learned are not to do with investment or property purchases – they are to do with culture. If you do not speak the language, enroll in a language course in Catalan or Spanish as soon as you possibly can. If you are relocating from abroad with your family, especially with teenagers or children, it may uncover a lot of raw edges and this can either bring you closer or move you farther apart – every family member, even if it’s just two of you, will need extra support so a positive outlook is essential.
If possible rent and live a short while in your preferred area before you make the final decision to relocate there. For example many people think of Catalunya as a fantastic holiday destination, which it is, but many of the beautiful coastal villages become virtual ghost towns out of season. Conversely, tourists in popular parts of Barcelona can be unbearable at times especially in the summer. This might be suitable or it might not – just don’t let it be an unwelcome surprise.
TS: Do you have any plans for further investments, and if so, any tips for first timers?
MR: I don’t have any plans for further investments at the moment, but now I have a better understanding of the system here if an opportunity arose I would be tempted. I believe there is one last design waiting to come out and in time I will sell one property and build a house in Catalunya. I do feel there has never been a better time to invest in Catalunya, but my hunch is this will not last too much longer.
TS: How so?
MR: In England and for Londoners and residents of wealthier boroughs like Kensington & Chelsea in particular, average property prices hover just over seven figures. Many people have unwittingly become members of the millionaire’s club. They own high value properties but probably do not feel anything like millionaires. The Bank of England base rate remains at an unprecedented low and paradoxically due to the economic crisis of the last ten years, many homeowners have been reluctant to increase their borrowings so equity is at an all time high. Regardless of which political power is in Downing Street, there has always been and there will always be an English malaise of ‘boom and bust’, cyclical recessions and property booms. Property owners in London are currently riding the crest of a wave but this will inevitably come crashing to the shore. The recent Autumn Statement saw a huge increase in stamp duty for purchasers of high value properties jumping from 6% to 12%. Bank of England interest base rates will increase and this is not a matter of ‘if’ but ‘when’. Average property prices in England are more than 4.2 times the average wage. All the signs are there. Inflated English property prices cannot be sustainable for much longer.
Across the channel things are different. Europe can’t shake the sceptre of recession and Spanish property prices stubbornly linger at the bottom of a bell curve. If you are working in Spain times are difficult, unemployment is high and wages are below the European average. The government does appear to be making inroads by reducing borrowing and raising taxes, but unfortunately there is still an over supply of homes from the last boom and borrowing is difficult so the property market languishes. There is a set of legislation in Spain that is counter productive to investment and economic mobility such as capital gains tax payable on the sale of a primary residence, the difficulty in obtaining tourist licences and the wealth tax. The result is a glut of empty office buildings and an abundance of properties for sale, but this is only good news for foreign investors.
TS: So what you’re saying is, now could be a good time to seize the day?
There is a very simple and basic golden economic rule, but for reasons that sometimes are unavoidable people just do not follow it and it is this: buy low and sell high. Right now it is a ‘perfect storm’ especially for the paper millionaires in Britain, or others with savings that are not keeping up with inflation to invest in Spanish property. Investment opportunities, a holiday home or even a wholesale move to Catalunya can make a lot of economic sense for Brits. Whatever the financial standing, money in Barcelona goes a lot further than it does in London.
Another lesser-known but simple economic rule is to compare the cost of a Big Mac to ascertain the value of items in different cities. The cost of a Big Mac is 20% more in Barcelona than it is in London – so go figure. Then of course there are matters of the heart. For many, giving up marmite and moving to a sunnier climate with a better healthcare system, healthier food, where older people happily congregate in neighbourhood plazas among the young rather than live in sheltered accommodation, where culture is on your doorstep, where the beach is a stone’s throw away and ski resorts merely two hours’ drive away is just not an option. Perhaps family and friends will be too greatly missed? My experience is it’s more than worth it and loved ones are all too eager to visit.
TS: In the UK you enjoyed non-dom status. What were the advantages of this and can you enjoy the same status in Spain?
MR: Being a non-dom in the UK used to have many benefits. The main one being that you pay taxes on your earnings in the place of your chosen tax domicile i.e. the one with the lower tax regime. In the UK non-doms would typically chose the Channel Islands as their domicile because the taxes there used to be nil. The result was that any income made abroad and remaining abroad did not incur UK tax. This had huge advantages on holidays for those purchasing property outside the UK, although of course if you did bring the income into the UK it would be subject to UK tax.
However, taxes in the Channel Islands and other ‘tax havens’ in Europe increased and in the last five years the UK government imposed £30,000 annual tax levied on all non-doms. For multi-millionaires this hardly makes a difference, but for someone like me, the additional tax made being a non-dom untenable. In Spain you can have a non-dom status and by looking at the number of cars with Andorra licence plates in Catalunya it’s clear that many non-doms have a home here. However, the rules are that you cannot spend more than 183 days in Spain in any 365-day period to maintain a non-dom status, so it may prove difficult!
TS: What advantages have you found to being in Catalunya where taxes can also be unforgiving?
MR: Taxation is a complex issue, suffice to say that the underlying income tax in Spain is nominally higher than in the UK, but other taxes are lower such as the duty on alcohol, fuel and tobacco. So, as a rule of thumb if you earn less but spend more it is advantageous to be in Spain, but if you earn more and spend less it is advantageous to be in the UK. Of course, I’m only talking about taxes here!
It is an important point for retirees and young people who perhaps do not earn as much as when they hit their mid career stride with one exception: Wealth Tax. Wealth Tax is equivalent to the proposed Mansion Tax in the UK, which was an extremely unpopular idea and never saw the light of day. This tax was theoretically abolished in Catalunya, but was reintroduced in 2011 as a temporary tax for two years and it is still around! If you are resident in Catalunya and have over €500,000 of assets, you are subject to this tax, which is calculated as a percentage of all your worldwide assets. Even as a non-dom it is applied to your Spanish assets. This tax can be quite onerous for high net worth individuals and it remains to be seen whether this temporary tax will be around for much longer.