The French property market and buying process

Despite the global economic uncertainty and Eurozone woes, the French property market continues to prove resilient, fuelled by high levels of activity among domestic and international homebuyers, including Brits.

France offers a very different way of life and has a bit of everything and something to suit all tastes and budgets. Combined with good life expectancy, over 2,000 hours of sunshine every year, and a favourable exchange rate – sterling in November 2014 hit a recent historic high against the euro – the country has rarely looked more appealing. It is little wonder that so many Britons are crossing the Channel for a slice of this gateau.

The country’s striking attractions and rich culture, history, picturesque countryside, cities, food and wines are considered chic the world over. France is by far the most-visited country, attracting close well over 80 million tourists annually, according to the World Tourism Organization.
Regardless of the emergence of new global property destinations – some of which offer cheaper properties, France remains a firm favourite with British people moving abroad, second-home buyers and investors.

Trevor Leggett, chairman of Leggett Immobilier, comments: “There is a perennial desire among UK buyers to have a home in France where the weather, culture and simple way of living is seen as attractive compared to the stress of UK living.”

From a UK perspective, France is an easy commute, property prices are fairly stable and the country offers a good standard of living with general day-to-day living costs lower than most European destinations.

The risks associated with buying property in France have traditionally always been rather low, in stark contrast to some other European countries. Britons make up around a quarter of all expatriate homebuyers in France, with overall sales volumes now edging closer to the boom years of 2003 to 2007.

“UK buyers are back in force,” says Leggett. “Sales to UK buyers make up around a quarter of all non-resident purchases in France and we’re seeing increasing demand across the country. In particular our teams in the neighbouring Languedoc Roussillon and Midi-Pyrenees regions have seen sales rise sharply.”

Choosing a location

Wherever you choose to buy a French retreat, it is worth noting that France has a history of steady real estate capital gain and has been largely immune to property bubbles and speculation thanks to strong regulations and continuous appeal.

A host of destinations nationwide, including Paris, the French Riviera, Provence and The Alps, among others, are underpinned by strong fundamentals; high capital growth in a buoyant market, and wealth preservation in weaker times.

Paris

The French capital has long been identified as one of the most attractive European cities for investment, and is typically the most popular place for international purchasers to acquire a home in France. The prices of properties in prime parts of Paris have become disconnected from the rest of France, especially in and around the sought-after 6th, 7th, 8th and 16th arondissements (districts in Paris).

Côte d’Azure

The Côte d’Azure, often referred to as the French Riviera, ranks among the most stable second-home markets in Europe, with the upper market segment in particular characterised by a level of demand that remains consistently high. Areas like Nice, Marseille, St. Tropez and Cannes have long been the most fashionable places to buy a holiday home in France, but prices are not cheap.

Languedoc-Roussillon

The Languedoc-Roussillon area is a cheaper option to über-pricey Provence or the Côte d’Azur, with the most popular city being Montpellier.

The Dordogne

The Dordogne, in the Aquitaine region, where property prices start from under €100,000, has long been popular with Brits, thanks largely to its natural beauty, fascinating towns and villages, culinary heritage, not to mention vast selection of attractions and things to see and do.

Brittany and Normandy

Brittany and Normandy, located in northern France, are ideal for people who like cooler weather, fishing villages and seafront restaurants, while inland there are plenty of weekly markets, chateaux andgreen countryside. Houses here start from about €85,000.

French Alps

Homes here are primarily popular with avid skiers, unsurprisingly, but don’t forget there’s superb hiking and cycling when the snow disappears, so there’s a reason to go for the rental market at other times of year too.

Rental returns

Rental yields in France vary dramatically, from low single- to double-digit annual returns, depending on where the property is located.

Central Paris offers among the lowest yields, at around 3.5%, while higher returns can be achieved in many of the country’s strong tourist hubs, such a Cannes – a rendezvous for the rich and beautiful, which is renowned for hosting world-class industry festivals, including the glamorous Film Festival.

Sale-and-leaseback

The sale-and-leaseback system is generally attractive to anyone seeking a low-risk, hands-off, long-term investment, with gross annual rental returns of 3-6% achievable. The main benefit of purchasing a home that is offered with this scheme is that no VAT is charged on the property, which equates to a saving of 19.6% on the purchase price.

It presents investors with the opportunity to purchase property in popular tourist areas such as golf, ski or coastal resorts – most commonly a new-build apartment – and then lease it back to a management company for a typical initial term of nine to 11 years.

During the leaseback period, a reputable management company should be responsible for letting the property, furnishing, maintenance, and paying all bills.

British-based investors that never intend to personally use their property, but rather hold on to it purely for investment purposes, could potentially place the property into a UK Self-Invested Personal Pension (SIPP) tax scheme.

Buying process

When an offer is accepted on a home in France, the notary or estate agent will draw up the initial sales contract. Once this is signed, all the necessary property checks will be made by the solicitor (see ‘Legal Matters’ ), before final completion when purchase funds must be in place, while legal and agency fees must be paid.

Buying off-plan property

There are many points to consider when purchasing a property in the process of construction, as this inevitably involves higher risk than buying re-sale property.

There are three main stages to the off-plan buying process:

  • Firstly, there’s the reservation contract, secured by a deposit of up to 5% of the purchase price. On signature of the purchase deed the title passes to the buyer at which point he/she must pay a proportion of the purchase price to the notaire, most commonly in the region of 30%, plus notaire fees – usually around 3% of the purchase price.
  • Secondly, the conveyance. Staged payments are then made in line with the contract schedule in accordance with the progress of work. These are secured against certificates from the developer’s architects that guarantee the appropriate stage has indeed been completed. Buyers should regularly visit the development during this period to ensure that all is proceeding according to plan.
  • Finally, completion. The purchaser can take possession once build is completed and all payments have been made.

Buying costs

When buying your property in France, there are various buying costs you need to take into account and budget for in addition to the purchase price.

  • Estate agent fees, although usually met by the seller, they are occasionally part-paid by the purchaser
  • Stamp duty of up to 5%
  • Notaire’s fee of €1,000-€2,000, depending on the property’s value
  • A mortgage fee of around 1%
  • Solicitor’s fees of typically €800 to €2,000

Continue to section 2: Legal matters

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