Could You Afford a Home in Europe?

Rising costs are causing more and more Americans to look further afield.

The cost of keeping a roof over your head and food on the table keeps climbing, and many Americans are starting to feel the pinch. In June, median rents crossed the $2,000 mark for the first time ever, according to Redfin. Meanwhile, home prices increased by 30% between 2020 to 2022. 

It's hardly surprising then, that some Americans are considering moving abroad to lower their costs. Europe is a popular option, particularly as the dollar is strong against the euro right now. Real estate businesses say there's been a spike in interest from American buyers, particularly countries like Portugal, Italy, and France. 

Paulo Fernandes, managing owner, Paris Ouest Sotheby's International Realty, says the number of visits to the company website from abroad has increased by 40% since September. "Foreign buyers remain interested in Paris because a classic Paris stone property is a safe investment, and prices here are perpetually rising," he said.

Could you afford a home in Europe?

It's almost impossible to make direct comparisons about prices between the U.S. and Europe because there are so many different factors involved. Just as a home in New York would cost significantly more than one in Mississippi, buying in major cities in Switzerland or Germany would be markedly more expensive than in parts of Italy or Spain.

The median property in the U.S. costs $428,700, though prices vary wildly from city to city and state to state. According to The Ascent research, average property costs in Hawaii are over $1 million while West Virginia comes in at less than $150,000. 

Most European countries measure property prices by euros per square meter rather than total costs, making it difficult to compare like with like. One study showed that the average property cost in Portugal -- a popular destination for Americans right now -- stood at about $365,000 in the third quarter of last year. Properties in some parts of the country are less than $125,000.

Bloomberg spoke to a woman who had moved from Atlanta to Italy. Rising prices meant she hadn't been able to get a foot on the property ladder in the U.S. even with $300,000 in hand. In Sicily, she bought a house and the neighboring storefront for 60,000 euros. Moreover, if you're willing to live in a remote village and tackle some serious renovations, there are parts of Italy where local authorities sell fixer-uppers for just 1 euro. It's not as sweet a deal as it sounds, as you have to commit to the refurbishment costs and legal fees.

Considerations when moving abroad

There's all kinds of attractions to living in another country. Not only might you be able to reduce costs or buy property in a more affordable market, you also get the joy of discovering a new culture. Remote working makes nomadic lifestyles more accessible, but it isn't for everyone. 

Here are a few potential headaches for anyone considering relocating across the pond:

• Visas and other paperwork: I've lived in several different countries, and visas are always a hot topic among expats. Make sure you fully understand the rules. Also research to see if there might be any upcoming changes. 
• Taxes: Don't forget about tax rules. You'll still have to pay taxes in the U.S. And while there are systems to avoid double taxation, you may also have to pay tax locally. Make sure you understand what you'll have to pay, including any local taxes or property taxes.
• Language: Learning a new language can be challenging, as can living in a country where you don't speak the lingo. If you're considering moving to Spain, France, or Portugal, take lessons before you go.
• Banking and credit card fees: A credit card that doesn't charge foreign transaction fees is essential. Otherwise you could pay around 3% on every foreign transaction. There are other bank costs to consider too. For example, if you're planning to buy a house, you'll pay to move that money internationally.
• Healthcare and insurance: You may need to pay for international health insurance. Look into other types of insurance too, you might need shipping insurance, home insurance, or travel insurance to protect you against theft or crime.
• Unexpected emergencies: If you're moving abroad, you may need a larger emergency fund than you're used to. When you calculate how much you need to put aside, bear in mind that an emergency might entail flying back to the U.S. as well as time to look for a new job. 
• Mortgages: Depending on your situation, you may find it difficult, or even impossible, to get a mortgage to buy a property overseas. Be prepared to pay higher interest rates on your mortgage, and potentially make a larger down payment as well.

Bottom line

Americans are increasingly weighing the benefits of a move to another country, particularly if it helps them buy a home or reduce living costs. Rather than asking whether you could afford a home in Europe, think about whether you'd be able to build a life in another country. 

Would you be able to manage long distance relationships with friends and family? If you're working remotely, how will you handle the time difference? And do you have funds saved up to cover any unexpected expenses? The more you can prepare beforehand, the more rewarding the experience will be.