Buying Property In France

At first glance it is easy to see why France is one of Europe’s top tourist attractions, from the elegance and culture of Paris to the glitz and glamor of St Tropez and Nice, and the rural beauty of Province; France really does have something for everyone. The landscape is ever changing with the flat lands and rolling hills of the North and West to the snow-capped mountains of the Pyrenees in the South and the ever popular Alps in the East.

France is the largest western European nation, and offers one of the greatest variations in cultures, which adds to the beauty and attraction of the area. It is easy to see why the country continues to go from strength to strength, and remains at the forefront of the expansion of the European Community. In recent times we have seen a major change in the business community of France, as the state continues to loosen the once tight grip and embrace the free market culture so prevalent in Europe. While agriculture still plays a major part in the employment landscape of the country, the flourishing wine industry grows ever stronger as the years progress. Indeed, the Champagne region of the country is responsible for the ever popular party drink of the same name, with recent a European directive stating that Champagne must be produced in the Champagne region of the country, leading to an increase in retail activity.

The country has excellent transportation links with mainland Europe, and borders Belgium, Luxembourg, Switzerland, Italy and Spain with the UK only a short hop across the English Channel.

Property Market

In a country where it is still the norm to rent rather than purchase property outright, the property market has been in a general upward trend for some time. However the sector did suffer from a lack of development and inward investment in the 1990s, as the country sought to reposition itself at the forefront of the expansion of Europe. Now back on track, the French residential property market has been growing at about 4% a year since 2001.

Unlike the UK, which has gone through many boom and bust scenarios in the property sector, the French market is more stable due to the preference for long term rental agreements, rather than an outright purchase. Currently the rental market is producing net returns in the region of 8% - 10% (depending on regional variations) for prime properties, with the potential for sustained long term capital growth.

Overseas property investors have been targeting the inner city and large town areas, where there is a constant demand for business rented accommodation. This has produced a relatively low risk market, due to the constant demand. That is not to say that the French villages and country retreats have not benefited, with many foreign investors looking for second homes and holiday homes in this vibrant country.

There is also a valuable tax break in the French property market, with off plan, new build properties able to claim “Residence de Tourisme” status. This allows a buyer to purchase a property freehold without a mortgage, then lease back to a third party (developer or rental company) for a set period (standard length 9 years) at a fixed rent. At the end of the agreement, the property is returned to the buyer in prime condition. In return for this investment, the French Government has agreed to return the VAT element of the purchase price, currently 19.6%, offering a massive incentive to would be investors.

After taking into account the attractive tax breaks, the varied cultures or the country, and proximity to central Europe it is easy to see why the French property market is so strong. Compared to France, the UK buy-to-let market is in its infancy. Around 25% of the French property market (equating to around 5 million homes, against 130,000 properties on the UK) are privately owned, but rented out on fixed tenancy agreements. The average rental agreement in France is 3 years, which explains why the market remains more constant, and less volatile than the UK property market.

Why Invest In France ?

If you are seeking a holiday hideaway, or a long term overseas investment, France is a area which you should definitely consider. The country is within a couple of hours drive of a variety of European counter-parts, offers a vast array of climates and cultures together with a favorable investment environment. The type of property for sale in France includes gites, apartments, country cottages and conversions.The residential property market has benefited from a number of factors, including the influx of both US and UK investors (inspired by such TV programmes such as “A Year in Provence”), and the vast array of properties styles available.

There is also the deeply embedded rental culture, which has sheltered the French property market from excessive price swings seen in other European countries such as the UK. As more property is bought on a longer term basis than most areas of Europe, there is a constant demand for both major city and regional properties, ensuring a fairly stable market place.

Whether you are looking for the glitz and glamor of Cannes, the culture and beauty of Paris, the quiet life of the countryside, or Skiing in the Alps, France has plenty to offer. As the French industrial sector continues to open up, and take in the Free Market culture of Europe, it is inevitable that overseas investment will continue to increase. A perfect place to relax and escape from the stresses and strains of life, France is fast becoming one of the most popular locations for a second home.

In summary the main reasons why one should invest into French property are given below :-

• Stable property market;
• Favorable investment environment with attractive tax breaks;
• Within a short distance of the main countries of Europe;
• Ever increasing inward and overseas investment;
• A vast array of climates and cultures;
• Long term residential property price growth of 4% p.a.;
• Net Rental yields in the region of 8% - 10% ;
• Capital gains tax on property at 16% against historical figure of 33%.

A major power house of the European Community, France is the World’s most visited country and it is easy to see why.

Outlook

As the French government continue to increase spending on the transportation network, and encourage overseas investment, the French residential housing market seems set for another sustained period of constant growth. A great escape from the ever more volatile boom and bust nature of the UK economy where, in direct comparison to France, the trend is toward house buying rather than the embedded rental culture of France.

With the French authorities set to continue the attractive tax breaks for the foreseeable future (which has seen capital gains tax on properties fall from 33% to 16%), the potential for capital growth seems encouraging. Net rental income is in the region of 8% to 10%, depending on the region and style of property, offering a steady return.