July 2018 – French Mortgage Transaction of the Month

As we come to the end of the ski season, this month we focus on the booming resort of St Martin de Belleville in the French Alps.

This British CEO came to us seeking a loan after having been refused several elsewhere. Despite an incredibly strong profile, French retail banks were not able to take into account 100% of the client’s income as they were over the age of 57. In addition, many private banks are unable to grant loans for construction projects due to the changing nature of the value of the asset under security and during the project they find it difficult to assign a proper value to the property.

We have access to and partnerships with private banks that will lend money for construction projects so for this apartment worth €3.2m we arranged for a 100% loan at a fixed rate over 20 years with just under €1m being transferred to the bank as additional collateral in a mixture of cash and other assets.

For further information on acquiring French mortgages, please get in touch.

 


Mortgage patterns around France

With France’s variety of destinations (coastal, city, alpine & rural) each investor’s reasons for buying is different from the others. However, there is a pattern in the numbers though, as our graphic below shows.

Generally the pattern is one of tourism, with those areas frequented by the most national and international tourists generally offering the best mortgage rates.

One reason behind this is that, whilst banks don’t take potential rental income into account with individual applications, they do see these areas as the most reliable, with tourism supporting the rental markets and often, as a result, the property sales markets of these destinations too.


Real estate credit: France champions rates in Europe

Crédit Foncier has published the sixth edition of its European study on mortgage lending. France has confirmed its dynamism in this area thanks to low rates and a very reasonable level of debt per household.

France is moving towards a dynamic mortgage market, apparent based on the latest edition of Crédit Foncier’s annual study on residential real estate loans. The study covers the 28 member countries of the European Union.

France bronze medal of credits

With €984bn outstanding at the end of 2017, France accounts for nearly 15% of total outstanding mortgage loans in the EU. This puts it in third place in the pack of countries with the highest volumes of loans, just behind Germany (with €1.175bn) and the United Kingdom (€1.360bn). According to the study, Germany and the United Kingdom alone account for 40% of mortgages while they represent only half of the population in Europe.

A French market growing faster than the European average

At the European level, Crédit Foncier reported that €6.4bn were outstanding at the end of 2017, depicting an annual increase of around 4.3%. By comparison, the French market recorded a volume acceleration higher than the European average with growth of 6% over one year.

2017 – an exceptional year

This situation is owed to the fact that: “France stands out above all for its very low level of pricing. It displays the most attractive mortgage interest rates among major European countries: 1.56% in the second half of 2017, compared to 1.83% in Germany, 1.92% in Spain, 2.05% in United Kingdom and 2.42% in the Netherlands “, reports Crédit Foncier. It must also be added that the year 2017 was exceptional in terms of real estate transactions since they closed in on the one million mark and recorded an increase of more than 15% compared to 2016.

A favorable situation that should last in 2018

With lower borrowed amounts, a reasonable level of debt and some of the most competitive rates, France could continue to benefit from this “state of grace” during 2018. Thus, on the side of the rates, the fuel of the market, it’s still calm with rates still below 2% and, in terms of activity, if the frenzy experienced by the soaring market in 2017 seems positive, professionals now expect a soft landing and more reasonable volumes but with stable prices.


June 2018 – French Mortgage Transaction of the Month

This month we’re back in the Three Valleys helping a client with a complex income solution.

Looking to buy a €2.25m property in Méribel, this leading Irish real estate developer had a financial set up that was too difficult to explain to French retail lenders. Despite our best efforts the French banks could not consider enough of the income to make the loan work for this purchase of an existing property in Méribel Les Allues and he did not wish to complete in cash due to the exchange rate at the time.

Instead we opted for a loan with a private bank where the client had to open an account with a minimum of €1.2m in assets with the bank. The client was attracted by the fact that he could use Sterling to fund the account and so would not have to exchange his pounds for euros at a disadvantageous rate. We obtained a fantastically low rate of interest at 1.38% with 100% LTV at a fixed rate of 5 years for this interest only facility.

For further information on French mortgages and how to calculate your affordability for a French mortgage please get in touch with one of the team.


French Mortgage Watch – February 2015

The ‘pâtisserie est ouverte!’ French property sales surge on excellent purchase conditions

French property agents and developers are all talking about a return to the heyday of French property sales in the middle of the last decade as sales surge on the weak euro and ultra-low interest rates. One of our major partners has experienced record sales on new-build property in the Alps posting 40% of last year’s turnover in the last two months alone and the trend is set to continue into March with “hot cakes” and “des pains au chocolat” being mentioned.

The biggest difference now is that current purchase values are much higher than they were in 2005 with many more people buying in the €1m+ range. Whilst people are buying across France, the Alps are in special focus and with the all-time low for a 20-year fixed rate mortgage now at 2.65% for a standard client, we can see the buying spree continuing for some time to come.

French Mortgage Best Buys
Repayment
RateDurationLTVDescription
2.00%20 years80%Tracker mortgage 3m euribor +1.9%
2.10%25 years80%Tracker mortgage 3m euribor +2.0%
2.80%25 years85%Rate capped + 1.5% for 10 years
2.65%20 years80%Rate fixed for the term
3.05%25 years80%Rate fixed for the term
3.30%25 years85%Rate fixed for the term
Interest Only
2.30%15 years70%Tracker +1.95%
2.60%15 years75%Tracker 3 month Euribor +2.55%
3.55%15 years70%Fixed rate

France in the Press

Positive news about the French economy and how other countries financial woes are effecting French ski resorts make this month’s round up.

France PM Valls pushes key economic reforms through

French economy grows slightly

Russian economic woes hit French slopes

Property of the month

French-mortgages

Combloux-Megève

  • Luxury ski chalets
  • Up to 80% LTV mortgages available
  • Central ski-in location
  • Great views of peaks & village
Find out more

From the blog

Transaction of the month – luxury chalet using an SCI

This month’s transaction of the month is by a HNW buyer who used the ultra low rates and advantageous SCI structure to purchase a large chalet in the French Alps. Read more

Top 10 most expensive ski resorts in France announced
Megève, where you can buy a property for an average price of 7497 euros per square meter, tops the ranking according to new data from MeilleursAgents.

Read more

French households have less debt

New figures show France has less household debt, even when compared to those of the world biggest economies.

Read more

A 100% residential building coming soon to La Defense

For the first time in 30 years, the ‘Skylight’ building in Paris’ La Defense district will be 100% residential, comprising 168 student rooms and 113 dwellings.

Read more

Rate and indices

European Bank Base Rate and Euribor
TThe 3-month Euribor has dropped once again, pushing down French mortgage rates even further. The vast majority of all French mortgages use the 3-month Euribor as their reference index with a margin added on top. Current margins are in the region of 2% over the 3 month Euribor.

mortgage advice

Fixed rate mortgages: The TEC 10 index

The Tec 10 has rebounded slightly from the low 0.5 mark to the mid 0.6 mark this month. The TEC 10 index in France gives an indication of how much the French government is charged to borrow money on a 10-year basis. In this way it is also an indicator of economic confidence and the perceived outlook for growth. Movements in the TEC 10 often produce changes in the available fixed rate mortgages in France. These changes are not instant and usually take a few weeks to come into effect.

french mortgage tips

Currency Rates vs Euro

All eyes remain on Greece as the euro has traded through the early days of February in a rather skittish manner. Both Greece and the European Union still seem far apart at the negotiating table and a deal on funding must be reached by the end of February or the Greek banking system will run out of funding. We know funds are leaving Greece, it is a case of how much and how fast that will govern the stability of the Greek infrastructure. It is hard to be positive on the euro at the moment but we believe that a deal in the end will be completed.

Currency

1 GBP buys1.36
1 USD buys0.88
1 AUD buys0.69
French Private Finance

Second homes in France offer the best value for non-residents

While prices of primary residences in France continue to decline, the second homes market offers even more value for non-resident buyers.

“A sea view apartment of 90m2, with roof terrace of 150 m2 for 850,000 euros; I have never seen such an exceptional price…” said Peggy Bancquart a realtor in Saint-Tropez. Domestic second homebuyers are becoming cautious in such markets, leaving incredible opportunities for more engaged non-resident buyers.

“Second homes are goods that we [the French] buy when everything goes well,” said Jean-François Buet, the President of the Fnaim. He estimated the number of transactions in this market fell by 30%, and prices by 15% to 20%, “but with significant regional variations and type of housing.”

They type of property which has suffered the most is not at the top, but is very close, specifically those with slightly less than exceptional locations. The properties that do not have the x-factor are failing to convince buyers to pay the high prices demanded by sellers.

“The market for second homes used at the weekend, more than an hour from big cities, is the most affected,” said Fabrice Abraham, CEO of Guy Hiccups network.

Deviations of 20% to 30% of the original price are becoming commonplace. “Today, nothing is selling it without a dramatic drop,” says Frédéric Halimi, real estate agent in Canet-en-Roussillon. A study by Guy Hoquet Real Estate, housing prices have dropped considerably in areas where second homes are numerous: more than 20% decrease in 2014 in the Centre region, 10 % in Basse-Normandie, 6.5% in Brittany and in the PACA region, against a decline of only 1.7% in the whole country.


With Paris apartments the best value is at the top

There have never been as many large apartments on the market in Paris. “In one year, the time it takes to sell a three bedroom apartments increased from 54 to 73 days in our network,” said Fabrice Abraham, president of Guy Hiccups.

According to the Parisian notaries, the price of Paris apartments over 100 square meters has dropped 3.9% in 2013 and 1.7% in the first 11 months of 2014. Many industry experts put this drop down to the sharp increase in stock, which came about as a result of Hollande’s wealth tax enforcement back in 2012. The effects of this move are still being felt today.

Yet whatever the reason for the price drop, the turnaround is perhaps not so surprising as this type of property had appreciated by almost 10% per year between 2000 and 2008, with the exception of 2001 (+ 1.9%).

Resistance in the East

A more detailed analysis shows that the decline is stronger in the central and western districts of Paris. Between 2011 and 2014 average prices decreased from 14,260 euros to 12,550 euros in the 7th (-12%) and 10,940 euros to 9,850 euros in the 1st (-10%).

However, they have hardly budged in the 10th, 11th and the districts of the east providing evidence of a ‘rebalancing’ of prices between the historically more expensive western areas and the generally more affordable east.

In the 16th the situation is mixed. In appearance, the prices seem to resist: between 2011 and 2014, the average price of apartments over 100 square meters decreased from 10,070 euros to 9,340 euros (-7.2%). But these figures mask very different realities depending on the type of property.

In this iconic district of the capital, the richest of Paris’ large residential areas and the only district to hug the Bois de Boulonge, the stock of haussmannian apartments for sale has considerably inflated to the point of unbalancing the market.

Many of the larger apartments also require lots of work to bring them up to a level consistent with modern day requirements and this is scaring off a large proportion of buyers. Does this mean that one hundred square meters in Paris is now too much?

The price of these apartments fell by 25% to 30% from the peak in 2011 and if they have defects, the price drop can exceed 30%. Despite their value, French families cannot afford them, meaning the only available market is that of international buyers.


French households have less debt

Compared to other EU neighbours French households remain relatively low debt. According to the Bank of France, French debt was 84.7% of gross disposable income at the end of September 2014, a level equivalent to that in force a year earlier (84.6%).

According to a study by the consulting firm McKinsey, debt of French households has increased by 15 points since 2007 largely due to the rise of real estate prices. Nevertheless, the French remain among the least indebted households from rich countries, with the Germans (82.7% of income) and also the Italians (62%).

Conversely, at the end of September 2014, the Americans were still indebted to the tune of 136.5% of their income, the English 134.5% and Spanish 111.8%. And although they have made big debt reduction efforts since the crisis of 2008 in other countries, such as Denmark and the Netherlands where households continued to accumulate credits, the situation is even worse, with a debt ratio to 269% in the former and 230% in the later.

A good thing for France under the eye of ratings agencies

So as well as being wise, French households have a high savings rate (15.8%), and these two factors combined are part of the reasons why France hasn’t had her sovereign rating downgraded by the rating agencies.

France is rated AA by Standard & Poor’s (the third best score after AAA and AA +), AA1 by Moody’s (second grade) and AA by Fitch (third grade). Where the agencies all seem to agree is that with money matters, France and the French always plan long term making it the level of public debt less problematic.

French mortgages are a core part of this, with long term fixed rates offering long term fixed security.


February 2015 – French Mortgage Transaction of the Month

February’s French mortgage transaction of the month is another demonstration of how more and more bit ticket French property buyers are making the most of the super low mortgage rates in France.

The transaction was on a €1.9m loan fixed over 18 years at an incredible 2.75%. The property was a €3.5m chalet in the French Alps.

The buyer used an SCI (Société Civile Immobilière) to structure the purchase. An SCI is essentially a private, limited and fully incorporated company with a registered office in France. This ‘office’ can be the property itself and then shares of the SCI then own the property in question.

There are many advantages of owning a French property through an SCI, including taxation benefits. Yet perhaps one of the most commonly appreciated advantages is that, being a company, the shares of the SCI are owned by its shareholders, in many cases, family members. This means that throughout the course of a buyer’s life they can bequeath shares to members of the family in a tax-efficient manner.


A 100% residential building coming soon to La Défense

The construction of the ‘Skylight’ building starts next month and is set to finish by the second quarter of 2017! For the first time in 30 years, the building in Paris’ La Defense district will be 100% residential, comprising 168 student rooms and 113 dwellings.

If you are one of the thousands of time-starved executives who commute daily into La Défense, this new building could be the answer. While about 10,000 people already live on this slab of financial concrete just outside of central Paris, no purely residential building had been built there for 30 years.

A bill of sale was signed between EPADESA and property developer Nexity. It focuses on the realisation of the Skylight development in the ‘Jardins’ district in the heart of Paris-La Défense (commune of Puteaux).

The building is imminent: Skylight construction will start next month and will finish by the end of the second quarter of 2017. The building, which will be built across 18 floors, will consist of 168 student residences and 113 apartments from studios to 2-beds only, with exceptional views of the Grande Arche and the Garden District of the Ark.

A district to boost the attractiveness of La Defense

It is the Louis Paillard architectural firm who designed the building’s distinctly modern architecture, both in its form and for the materials used on the facades: steel, annealed mirror.

At its peak, a light cap, dynamic and colorful, will be  placed  in coordination with the public areas of the Gardens of the Ark, which is currently under development. The Skylight building is expected to contribute to the vitality of the business district.

And that’s not all: by 2017, the production of equipment such as the Arena Nanterre La Défense, a sports theatre for up to 40,000 people (one of the largest capacities Europe), offices, restaurants, ephemeral pavilions, a boutique hotel, housing or new public spaces will also improve the area.


Top 10 most expensive ski resorts in France announced

The ten most expensive ski resorts are all in the Alps. Megeve, where you can buy a property for an average price of 7497 euros per square meter, tops the ranking according to new data from MeilleursAgents.

Next week is the biggest week of the ski season as thousands of international and domestic skiers descend on the Alps. Following a slow start to the season, with late snowfalls, tour operators have been working hard to coin it in on their busiest week by offering low price deals.

For those visiting to look for ski property, the latest figures from MeilleursAgents may help them decide where and where not to look.

It’s worth remembering that the data is an average, taking into account the cheapest and most expensive properties. The type of new-build properties, which have the biggest demand from the international market always go for a premium, regardless of their location.

The first place went to the renowned resort of Megève, Haute-Savoie, where it costs 7497 euros per square meter on average for a house or apartment, virtually similar to prices in the French capital.

The other two stations that surpass 6,000 euros are Méribel (6617 euros) and La Clusaz (6127 euros).

At the bottom of this list and below the 5,000 euros per square meter threshold there is Tignes (4917 euros) and Avoriaz (4730 euros).

If you are looking to obtain a French mortgage for a ski property in France, be sure to check out the latest best buy rates, our handy mortgage calculator, or simply get in touch with one of our French mortgage experts.


French economy finally shows some signs of growth

The Bank of France sees growth of 0.4% in the first quarter of 2015.

Are we finally seeing the start of the long-awaited improvement of the economic situation in France? Today’s report from the Bank of France showed that the French economy is expected to reach 0.4% in the first quarter of 2015. T

This figure was stated within its monthly survey of economic conditions these numbers confirm the government’s forecast of up 1% for 2015. This goal was validated by Brussels last week.

Good news for the ever-optimistic French Prime minister Manuel Valls who estimated that France would ‘probably’ exceed the 1% growth. This was a belief he has since reaffirmed.

INSEE (the French equivalent of the UK’s Office of National Statistics) anticipates share growth of 0.3% in the first quarter of 2015 following an increase of 0.1% of gross domestic product for the fourth quarter 2014.

The official figure for growth of the last quarter of 2014 will be announced this Friday.

Another study by the Bank of France in January showed an increase of one point in the business climate indicator for the industrial sector. The building sector indicator was down one point to 90. For the industrial sector, the business leaders surveyed reported a sharp increase in production and deliveries, especially in chemistry, pharmacy and transportation equipment, including automobiles.

Business leaders expect a further increase in production in February.

In the services sector, activity increased “slightly”, the numbers are stable and prices continue to fall.

In construction, the production sales deteriorated again and the numbers continue to fall, with falling prices largely to blame. Business leaders expect a further reduction in their activity in February.


French Mortgage Watch – January 2015

french alps property

Who feels 20% better off?

With a planned injection of more than 1 trillion euros into the European economy we are most likely entering a decade of unprecedented buying conditions in France. The euro has now weakened by an average of 12% against many major currencies making it easier to afford deposits or properties bought with cash. It is now also easier to afford mortgage repayments and therefore the amount of money people can borrow in France has also increased by 12%. Essentially everyone is now 12% more likely to buy a French property.

How is this possible?

Lets take a moment to review what we have as of today. The lowest ever mortgage interest rates? Yes. Soft property prices? Yes. Good outlook for growth in the long term due to quantitative easing leading to tangible asset (house price) inflation? Yes. Foreign currencies at between six and eleven year highs on the euro? Yes, definitely more bang for your buck.

Take a look at the table below to see how things have improved over the last 10 months.

advice for french mortgages
French Mortgage Best Buys
Repayment
RateDurationLTVDescription
2.00%20 years80%Tracker mortgage 3m euribor +1.9%
2.10%25 years80%Tracker mortgage 3m euribor +2.0%
2.85%25 years85%Rate capped + 1.5% for 10 years
2.75%20 years80%Rate fixed for the term
3.15%25 years80%Rate fixed for the term
3.30%25 years85%Rate fixed for the term
Interest Only
2.30%15 years70%Tracker +1.95%
2.65%15 years75%Tracker 3 month Euribor +2.55%
3.55%15 years70%Fixed rate

Why should buyers be positive about French property in the long term?

Right now France is definitely a buyers market, as we’ve explained above. However the one thing which purchasers remain cautious over is property prices. Its always wise to be cautious yet if we look at the below chart we can see that French house prices have more or less followed UK house prices over the last 25 years.

So what has caused the change over the last 6 years?

One possible answer is the lack of QE in the European market. Six years ago the UK started printing money and the property market took off again. With some ups and downs depending on location, UK property has once again become a source of wealth creation. Now the UK is a much smaller market than the EU but it is not too much of a stretch to hope that the money being printed in Europe will find its way into property as it has in the UK and set house prices increasing in across France again, especially in the most sought after locations.

french private finance economist

France in the Press

France has made the headlines in many ways this month, but here are some interesting articles relating to the French economy & tourism in Paris.

Despite a difficult 2014, France is still far from being the ‘sick man of Europe’

New regulations to give boost to French economy

Paris Reassures Tourists Over Safety After Terror Attacks

Property of the month

img-prop

 

 

Val d’Isere

  • Extremely rare new-build apartments
  • Up to 80% LTV mortgages available
  • Central ski-in location
  • Great views of peaks & village

Find out more

From the blog

Transaction of the month – Big savings by Swiss expat

This month’s transaction of the month is by a british expat based in Switzerland. He saw his targeted property – a villa in the South of France – reduce in price by 15% overnight after Switzerland release the rate cap on the Euro. Read more

Luxury real estate in France is getting cheaper for Americans

The country is home to the largest contingent of the world’s wealthiest 1% and for them, France has become a much more affordable.

Read more

Record low French mortgage rates…continued

Since late 2011 mortgage rates in France have fallen by 1.63%, accordingly the latest figures published by Crédit Logement.

Read more

Mario Draghi launches €1.1 trillion quantitative easing programme

It has been a long time coming, but European Central Bank (ECB) president Mario Draghi finally unveiled his quantitative easing plan and it was bigger-than-expected.

Read more

Rate and indices

European Bank Base Rate and Euribor
The changes in the ECB rate generally drive changes to the Euro Interbank Offered Rate (EURIBOR). The vast majority of all French mortgages use the 3-month Euribor as their reference index with a margin added on top. Current margins are in the region of 2% over the 3 month Euribor.

tips for french mortgages

Fixed rate mortgages: The TEC 10 index

Following the series of announcements by Mario Draghi the TEC 10 has now dropped to it’s lowest ever level this week of 0.55%. The TEC 10 index in France gives an indication of how much the French government is charged to borrow money on a 10-year basis. In this way it is also an indicator of economic confidence and the perceived outlook for growth. Movements in the TEC 10 often produce changes in the available fixed rate mortgages in France. These changes are not instant and usually take a few weeks to come into effect.

french mortgage tips

Currency Rates vs Euro

January has been the month that has seen the euro start to fall apart. The single currency has hit 7 year lows versus sterling and 11 year lows against the USD this month as investors have reacted to the European Central Bank’s decision to finally launch an asset purchase plan designed to stimulate the European economy and the results of the Greek election. Banks are lining up to see which one can call the euro the lowest in the coming months, and the combination of this QE plan and the near-term strength of the US and UK economies should continue the single currency’s relative decline.

Currency

GBP1.338
USD0.880
AUD0.701
World First LofilegoRates and commentary provided by World First.

January 2015 – French Mortgage Transaction of the Month

Transaction of the month – Big savings by expat in Switzerland 

This month’s transaction of the month is by a british expat based in Switzerland. He saw his targeted property – a villa in the South of France – reduce in price by 15% overnight after Switzerland release the rate cap on the Euro.

Of course, as well as a reduction in price, his affordability also increased, enabling him to secure a 9 year fixed rate of 2.75% on roughly €1.5m of borrowing. the property value was around €3.0m.

There have been a number of CHF buyers coming through over the past week and we expect to see many more as the outlook for buyers improves in France.


Almost one-fifth of French are now remortgaging

Whilst foreign buyers have to rub their eyes every three months as they watch French mortgage rates fall further, the French are also making use of the historically low rates by remortgaging.

In 2014, just under one in five mortgages was a re-mortgage on a domestic property, according to new figures from the Crédit Logement financial observatory.

Households already in debt want to take advantage of historically low borrowing rates.

Some in the industry (not us) predicted French mortgage rates to rebound slightly towards the end of last year. What has actually happening has been the complete opposite.

At the end of 2014 credit rates in France averaged around 2.38% (excluding the cost of collateral and guarantees), rates not seen since the late 1940s. It is no wonder so many French with outstanding mortgages are quickly movement to reduce their borrowing costs.

In total 17.0% of all mortgages in France were re-mortgaged loans, but this was actually down from 17.2% in 2013. A marginal difference, but it is one that has sparked some disagreement over the accuracy over the figures.

“It is difficult for the market whole to establish accurate statistics, for example to distinguish precisely what falls from a pure rate renegotiation or operation prepayment as part of a sale followed by a new purchase, ” warns Nicolas Pécourt, communications director of Crédit Foncier.

The other challenge to these figures is that banks are reluctant to give such information because there are nervous about giving competitors the inside edge on the true sentiments of the market. Nevertheless, the general findings are ones of strong momentum towards remortgaging by domestic French owners.