Posts in category: News

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.


Real Estate Loans: Rates Still Low

This year remains an optimal time for real estate purchases. This is because rates remain exceptionally low due to constant competition between banks to attract the best profiles of borrowers.

The Notaries of France have established that 965,000 transactions were made in real estate between February 2017 and February 2018, an increase of 10.9% on the previous year. These excellent figures were predominantly driven by low credit rates.

Rates that remain attractive

In its latest statistical analysis, the Crédit Logement observed that in March 2018, the average nominal rate (excluding mortgage insurance) was 1.49%. Conditions were almost identical to those in 2017 which likely encouraged candidates to purchase. “Traditionally, in the spring, a very active period in real estate transactions, banks lower their rates considerably o capture a client base of new buyers … This is how we are getting rates close to the historical records of 2016,” says Sandrine. Allonier, Director of Bank Relations of the broker Youfinancer.

A slow and gradual rise in interest rates by 2020

“The pace of inflation is unlikely to decline in the future: after 1.2% in 2017, it should be between 1.3/1.4% (banking scenarios) and 1.6% (Banque de France) in 2018, and should accelerate slightly further by 2020 (1.8% according to the Banque de France)”, says the Observatory. “Mortgage rates are expected to increase only moderately in 2018 and end the year between 1.65% and 1.70% at most” predicted Crédit Logement.

Longer loan terms

2017 was synonymous with rising property prices, especially in popular areas. Low rates helped to absorb this price increase by extending the duration of loans. In the first quarter of 2018, the duration of bank loans were 219 months on average, or 18.25 years, according to the Housing Credit Observatory. Over the 2014-2018 period, the duration of loans has increased by more than one year.

Market lull

For real estate professionals, the first quarter of 2018 demonstrated a stabilising of the market with transaction volumes much quieter than in 2017 and prices that remained stable. “While the volume of transactions jumped 14% last year at national level, growth at the beginning of the year is only 2% compared to the last quarter of 2017” says the Laforêt network.

The advantage of online offers

In this context, it is in the best interest of bidders to take advantage of the competition that banks are pursuing to find the most competitive offer, according to their profile. In this respect, online banks have advantages over traditional banking networks. Thus Boursorama Banque offers a 100% online offer from the application to the loan signature, with some of the lowest rates on the market. Another advantage of Boursorama Banque is that they do not charge any fees. As a mortgage is not only a rate but also a long-term relationship between the borrower and his bank, Boursorama Bank have chosen to favour flexibility. For instance, they do not require proof of a regular income into a bank account to apply for a mortgage, nor do they give penalties in case of early repayment.


March 2018 – French Mortgage Transaction of the Month

This month we look at an booming sector of the French mortgage industry – re-financing.

Whilst technically this one isn’t a done deal yet (and therefore not truly a transaction), we wanted to highlight it as it demonstrates the incredible savings French property owners are currently making on their total long term interest amount by re-financing their properties while the rates are low.

The client, an owner of a three-bedroom ski apartment in the Portes du Soleil still had €640,000 remaining on his mortgage. The original product was a long term fixed rate repayment mortgage over 20 years, but as it was secured back in 2012 the rate was substantially higher, at 3.2%.

Using our contacts with a local bank and based on his profile we managed to secure him a market-beating rate of 1.7% fixed over 20 years on a repayment, no far off half the rate he was on previously.

Local banks are notoriously hard to find and work with, which means having a specialist broker navigate the process exponentially increases the chances of a better deal for those re-financing or even new entrants in the French property market.


IFI – New French Wealth Tax

French Wealth Tax – What’s happening?  

France has always had a reputation for being a high-tax environment, though the truth is it’s one of the most advantageous places to buy property from a tax perspective. However, there is a tax levied against net property and liquid assets held in France which has been part of building this reputation. Nevertheless, it mainly affects French residents rather than international buyers of French property. Since the high-profile exodus of over 60,000 millionaires during the last 10 years, there has been a significant drop in revenue into the government’s coffers. The Macron administration is hoping to entice the French expat elite back with a new wealth tax based on real estate assets only. This is also good news for British expats as well as non-residents with French mortgages.

Why is this important?

As stated above, the current wealth tax – Impôt de solidarité sur la fortune (ISF) – is soon to be replaced by the incumbent president’s Impôt sur la fortune immobilière (IFI). Apart from the rebranding, there are some changes to how this tax will be calculated. The current system is levying all the assets that one possesses whether in France or abroad (if a resident). The new tax will no longer apply to liquid assets. Instead, only real estate assets will be subject to tax in a bid to attract high net worth individuals back into country, having left France to shield their assets abroad in countries such as the UK. The revenue will come down to a mere €1.5bn, while the framework and scale remain unchanged.

How does the French Wealth Tax affect me?

If you’re thinking of buying a property in France or if you already own one, it might be subject to the new IFI. However, you are exempt from paying the IFI tax if the net property assets are inferior to €1,300,000. Below you will find a threshold tariff table. 

The threshold net value subject to tax Tax rate
Up to €800,000 0%
From  €800,001 and €1,300,000* 0.50%
From €1,300,001 and €2,570,000 0.70%
From €2,570,001 and €5,000,000 1%
From €5,000,001 and €10,000,0001.25%
Above €10,000,000 1.5%

*This will only apply if the net property value is at €1,300,000

The bigger picture

It’s worth considering taking a mortgage on your property even if you can afford to pay for it with cash. This will help you avoid paying the wealth property tax for potentially several years. We can put you in touch with the right person to speak about your options. For French mortgage rates, please consult our best buys table.


French mortgage interest rates unlike to rise in short term

 What’s happening here?

The European Central Bank (ECB) has announced recently that it will take cautious steps when considering raising the interest rates.This slow approach will ensure a continued growth of the eurozone economies and avoid repeating the mistakes of 2008 and 2011.

Why is it important?

Ever since the financial crisis of 2007, the ECB have acted to support and protect the economies of the eurozone by buying different types of securities, especially government bonds, to keep the interest rates as low as possible. This in turn pushes people to spend more, for example, by borrowing more money and therefore contributing to growing the economy. This programme – quantitative equity (QE) – is expected to last at least until September 2018. It comes as a surprise to some analysts who expected the bank to start withdrawing its aid system sooner due to the Eurozone economy showing strong signs of growth.

How does it affect me?

This is good news for people looking to buy property in France. With the bank promising to spend €30bn a month on buying bonds, the interest rates will not rise across the Eurozone, at least not drastically. This applies to any type of loan and especially to interest rates for French mortgages. Commentators in France have noted that interest rates slightly decreased in October and now, on average, you can obtain a French mortgage interest rate in the region of 2%. The president of the ECB, Mario Draghi, has said that it is likely the bond-buying scheme will continue beyond September next year. With this in mind, borrowing money in euros looks set to remain attractive. This is especially true because of the continued strength of the euro despite the uncertainty of Brexit negotiations. Furthermore, French property prices, which have seen healthy growth in recent times (cf. 7% on average in Paris alone), are a good investment alternative to make your money work harder as opposed to the low-yielding savings accounts.

The bigger picture

The ECB has been criticised for not outlining a more daring programme to scrap QE. Especially when the Federal Reserve Bank, has already decreased its buying scheme. The American economy has continued to show strong growth in year to date. In spite of this sceptical view from economists, the ECB’s announcement translates to greater stability of the countries with common currency and fingers crossed avoiding stagnation of the economic growth.


Record-level of borrowing in sight for 2017

What’s happening here?

With French mortgage interest rates just above their all-time-lows, the number of new mortgages in France is set to reach a record figure of €260 billion in 2017. This is due to favourable market conditions with French and international buyers who are keen to capitalize on cheap mortgage rates, well priced property and stable price increases.

Why is it important?

The French mortgage market has been extremely active in the last year. Despite the recent slowdown over the holidays, the total amount of outstanding loans in France reached €935 billion in August – a 6% increase for the same period year-on-year. Since the beginning of 2017, the total value of registered new loan offers in France has seen an incredible 50% increase totalling €210 billion for the year to date. Even in the most conservative scenarios, the predicted cumulative sum of new house loans will surpass the previous record of €251 billion set in 2016, according to Les Echos.

How does this affect me?

With the end of the year looming, the French banks are keen to finance projects that will complete this year to maximise their revenue towards their annual targets. This means they will be prioritising applications which they think can be completed before Christmas.

The bigger picture

In spite of the record year in progress for mortgage volumes, there still seems no immediate threat of increases to long term French mortgage interest rates. Once this Bloomberg index goes consistently over 1%, we will start to see adjustments to interest rates.


Changes to French mortgage insurance from the New Year

WHAT’S HAPPENING HERE?

The so-called ‘Bourquoin’ law envisages changes to French mortgage insurance. The new legislation will allow you to swap your insurance from your lending bank to another insurer at each renewal date. The majority of borrowers choose to insure with the same institution.

WHY IS IT IMPORTANT?

From the start of next year, it will be easier to notify your lending institution that you no longer wish to use their French mortgage insurance at the end of the contract. To do that, you will have to send a letter (2 months before the renewal date) along with the new contract from your new insurer. The guarantees of the mortgage insurance will have to be at least the same as your former agreement. In theory, this will open up this rather complicated market and should play to the advantage of the loanee.

HOW DOES THIS AFFECT ME?

Mortgages in France must be accompanied by a life insurancepolicy. However with some lenders and in some cases, it is possible to obtain a loan without life insurance at lower loan to values. Examples of this would be below 50% LTV. However, this is by no means guaranteed and the banks reserve the right to insist on life insurance. With the new legislation, you could potentially obtain a lower payment rate for your mortgage insurance for your existing mortgage. You will be free to choose from an array of insurance brokers available on the market, thus potentially reducing your monthly premiums. However, French banks are hesitant to approve mortgages with life insurance from other institutions; they will not surrender without a fight and may set new conditions to the loan such as increasing the rate or the annual fees.

THE BIGGER PICTURE

The French banks are unlikely to accept an overseas mortgage cover to replace a French one and changing will be difficult. This is why, as with your French mortgage, it is very important to secure the correct product from the start to avoid unnecessary complications down the line.

 

Read more onlife insurance cover.


Paris: boom of fines for rental of tourist apartments

In one year, the number of fines relating to the rental of tourist accommodation, mainly via Airbnb, has multiplied by thirteen.

Parisian authorities are watching the market, and seeking out illegally rented properties. According to the daily newspaper Le Parisien, the number of fines related to the failure of declaring tourist rental accommodation (eg. on Airbnb) or exceeding 120 rental days permitted by law, has increased by 13 times.

The agents of the Directorate of Housing and Habitat (DLH) have hence pinned 31 owners condemned to pay the City a total of €615,000.

Clearly, the numbers are exploding. In the first half of 2016, the city “had recovered only €45,000”, which is 13 times less than in 2017. In Le Parisien, a deputy of the mayor of Paris indicated that this explosion of convictions does not show that there are more illegal rentals, but “that the controls are stricter and that more people are getting caught”.

However, according to the DLH, it is, above all, the punishment which is more severe. Also, multi-owners are most often targeted, says the mayor of Paris. The Council of Paris voted unanimously on Tuesday 4 July, for the establishment of the “Airbnb decree”. This obliges all renters of tourist accommodation to register online – and only online – with their town hall before publishing an advertisement on platforms such as Airbnb or Abritel.


Real estate credit rates slow down

The majority of banks have not increased their mortgage rates, according to the figures reported this week by major brokers. Good news for individuals who will have to keep an eye on some hot issues.

Those who are on vacation and thinking about buying a house soon, don’t worry! The summer period, usually more agitated in terms of mortgage rates, is rather quiet.

The average rates out of ten (1.30%), twenty (1.80%) and thirty years (2.85%) show very slight increases, but not enough to curb the borrowing capacity of purchasers. Over the last fifteen and twenty-five years, rates remained stable at 1.55% and 2% respectively, according to Empruntis. “It is interesting to note that this year we are not witnessing the traditional hike in rates imposed in previous years by banking institutions in the course of the summer, in order to try to discourage those least motivated, emphasizes Maël Bernier of Meilleurtaux.com.

Why have rate increases calmed down? Because OATs, on which financial institutions rely to establish their mortgage lending rates, are still at very low levels (between 0.8% and 1%), although they have risen somewhat in recent months. This allows banks to maintain a comfortable margin, which maintains low rates for individuals, offset by strong increases in real estate prices, in Paris as well as provincial cities such as Bordeaux or Rennes.


France’s new highest tower

After six months of negotiations, the French oil group Total has chosen its new address for its future headquarters, which will come out of the ground in 2021. If Total changes tower, it will remain at La Défense.

This is good news for La Défense, which continues to confirm its position as Europe’s leading business district. In fact, the economic lung of Paris will host a new giant tower in the next four years, in which Total will set up its headquarters. The group wishes to move Michelet and Coupole towers, considered to be ageing, where they have stood for more than thirty years. The management had offered for employees to choose their new place of work, among three possible projects.

Employees were given the choice between the Tower Sisters by architect Christian de Portzamparc, a 125,000 sqm office campus within a large 9-hectare park in Nanterre, and the “Link” tower developed by Groupama Immobilier. This last project was selected. In all, nearly 6,000 employees will be grouped together in this skyscraper of 244 meters in height, which will dominate the sky of Paris by 2021. The First tower, 231 meters high, will thus lose its title of highest tower of France.

The project is to be built in the Michelet district of Puteaux, on the edge of the circular boulevard, on the site of the current Michelet building, which houses part of the Groupama offices. The tower, which along with the First tower, will form a symbolic gateway to the district, will be visible from all over Paris, and will thus constitute a new landmark in the sky of the capital.


Record real estate transactions in France

More than 900,000 transactions have been carried out in the last twelve months in France, according to a note published by the notaries of France. A figure clearly higher than the 880,000 sales anticipated beforehand.

Between May 2016 and May 2017, 907,000 real estate transactions were carried out in France, according to a note of conjuncture of notaries of France published this Thursday. A historic record that exceeds the volume cumulated a year earlier (824,000 in May 2016). This performance is all the more unexpected since the last prospects of notaries, which result from the number of pre-contracts (documents whose signature precedes that of the deed of sale), anticipated a volume of transactions close to the 880,000 sales.

In any case, this surplus of nearly 30,000 sales shows how much the French have rushed to take advantage of the borrowing rates which, despite the slight rise at the beginning of the year, are still favorable. “There is no shortage of goods to sell, but properties are snapped up very quickly by investors, explain notaries. This situation results from sales that are made without negotiation, pulling prices upwards.


Artificial intelligence on the up in our homes

Estimated to be $19 billion by 2022, the artificial intelligence market is beginning to focus on the home. One company has designed the first virtual emergency store.

Will the house of the future be hyperconnected and intelligent? This is the bet that many French companies are making, whose innovations aim to make our life easier in our house. For example, HomeServe, in partnership with the European leader in natural language understanding Recast.AI, has developed a virtual assistant that offers solutions to solve domestic problems in an emergency.

Named “Tom”, this artificial intelligence takes the form of a “chatbot” on the model of messaging applications like Messenger or Whatsapp. The user explains the problem they face by message to artificial intelligence. From this information, Tom identifies the fault and makes a diagnosis. He then offers the right service, with a personalised quote and a fixed price. The client can then plan the intervention of an accredited professional close to home in order to solve their problem.

If you didn’t have hot water anymore, you’d probably know you’d have to call in a plumber, Tom only confirms what you already knew. But this new virtual assistant also finds you one, tells you how much a professional will cost and allows you to schedule an appointment.

Tom’s software, which integrates more than 450 incidents, is able to manage a conversation flow by adapting itself to the language of the user. The skills of chatbot extend today to plumbing and will expand tomorrow to heating and air conditioning.

“Tom is a self-learning bot that improves understanding and efficiency almost in real time,” says Linda Ghodbani, Director of Digital & Innovation. It thus deduces the intentions of the user to establish the final diagnosis and propose the good performance. The integrated payment on Messenger is not yet available in France, the internet user will have to finalize its transaction on the website depannetmoi.fr, to which the software is affiliated.