Immobilier et Finance : Les raisons du succès français

france

Une nouvelle étude révèle que le marché immobilier parisien est le deuxième plus attractif d’Europe pour les investissements immobiliers. L’étude, réalisée par l’agence immobilière Knight Frank, a examiné les villes les plus attrayantes du monde en matière d’investissements immobiliers parmi les particuliers fortunés (ceux dont le ménage a une fortune supérieure à 24,2 millions d’euros).

Un coût du crédit particulièrement faible

Depuis plus d’un an, les taux hypothécaires en France ont atteint des niveaux historiquement bas et avec la restauration de la confiance des marchés après les élections présidentielle de 2017. Ils ne devraient pas augmenter dans un avenir proche. Historiquement, le début de l’été est le moment le plus propice pour les acheteurs britanniques qui se lancent dans des visites d’observation de biens immobiliers en France. Les prêts hypothécaires secs (c’est à dire sans nantissement) avec une quotité de financement élevée (80 à 85%) que les britanniques peuvent obtenir peuvent être fixés à 2,70% sur une période de 20 ans. Des taux plus bas sont disponibles pour des durées plus courtes ou si un investissement est fait avec le prêteur (nantissement).

Des prix en perpétuelle hausse dans la capitale

Les acheteurs parisiens font face à des prix plus hauts que jamais, avec des propriétés évaluées à plus de 9 000 euros en moyenne au mètre carré, révèle un nouveau rapport réalisé par SeLoger. Le baromètre indiquait que les prix avaient augmenté surtout dans le 18ème arrondissement de la ville, rue des Abbesses et Boulevard Ornano, dans le 6ème rue Assas et Boulevard Raspail et dans le 4ème rue Rue des Archives et Place des Vosges. Selon l’industrie, les ventes ont augmenté de 7% en seulement un an à Paris.

Et un marché parisien qui ne risque pas de s’essouffler

Paris va accueillir les Jeux olympiques de 2024 et le marché de l’immobilier s’en trouve d’autant plus “sécurisé”. De nombreux habitants ont des raisons d’être heureux, leur potentiel de revenus provenant de la location à court terme a monté en flèche. Une vague de tweets à la suite de l’annonce des prix prédit jusqu’à 20 fois les taux actuels: 5 000 € par semaine pour un appartement de 70 m2 dans la banlieue de Meudon, ou 10 000 € pour une place rue Saint Honoré dans le 1er arrondissement.

Qu’en est-il de l’investissement locatif en France ?

Certains investisseurs choisissent l’investissement le plus sûr afin de ne pas se retrouver sans locataires, d’autres visent la meilleure rentabilité possible malgré un risque plus élevé. Cependant, est-il possible d’optimiser encore plus les facteurs rentabilité et sécurité ? Et bien nous vous dirons OUI. Pour cela, il est nécessaire de répertorier les villes où l’on peut observer des pénuries de logements, mais aussi, être sûr que cette tendance ne risque pas de s’inverser dans les années à venir. Voici quelques indices pour aider à se décider :

Les 10 villes françaises avec les taux de vacance les plus faibles (selon Le Figaro)

Les Alpes … Est-ce vraiment une valeur sûre ?

Alors que de plus en plus de Français et de Suisses optent pour des investissements immobiliers de luxe dans une station de ski, les villages alpins, conscients des nouvelles exigences de ces nouveaux acheteurs, doivent redoubler d’efforts pour attirer une clientèle plus sélective. En effet, l’attrait des montagnes n’a jamais été aussi fort. Animé par la génération des “baby-boomers” passionnés de ski alpin, le goût des sommets plus élevés n’a cessé de croître avec les générations qui ont suivi, à tel point que le nombre de touristes et d’acheteurs potentiels s’est fortement accru depuis le début du mois. En constante augmentation depuis les années 2000, on semble avoir atteint l’apogée entre 2008 et 2009, avec pas moins de 80 millions de visiteurs enregistrés dans les Alpes françaises et suisses. Malgré cela, BFM nous expose une chute de 13% de la fréquentation des stations de ski depuis les 10 dernières années. La France manquerait de moyens pour financer ses stations, contrairement à l’Autriche qui lui vole la vedette en europe en injectant des sommes d’argent considérables afin de maintenir une surface skiable importante. Cependant, cela impact uniquement les classes moyennes, les personnes les plus fortunées ne subissent pas d’effet négatifs.

Des prix qui atteignent des sommets

Avec un prix moyen de 25 500 € / m², Courchevel 1850 affiche les prix les plus élevés du marché de l’immobilier de luxe alpin en France. Val d’Isère n’est pas loin avec un prix moyen au m² de 19 000 € tandis que Méribel, Courchevel 1550 et Courchevel 1650 ont enregistré des prix moyens équivalents au m² de 16 000 € / m2.

France et Suisse : qui est la grande gagnante ?

Proche de Genève, Megève est particulièrement appréciée des Suisses cherchant à acheter. L’introduction d’un quota de 20% sur les résidences secondaires a contribué au regain d’intérêt des stations françaises voisines comme Megève parmi les Suisses. Les prix à Val d’Isère et à Chamonix ont augmenté respectivement de 3% et de 2,3%. Dans l’ensemble, les prix des biens immobiliers suisses ont chuté, même si ceux qui étaient négatifs en 2017 comme Villars ont augmenté de + 6% en 2018. C’est notamment dû aux restrictions imposées aux acheteurs étrangers mais aussi par la rigidité des prix, qui contribue au ralentissement des ventes.

alpes
Pour la France, et bien…

Tous les voyants sont au vert ! Après une chute jusqu’en 2011 justifiée par une crise économique douloureuse, on découvre que la perte de confiance pour ce marché ne fut que brève et passagère. Du côté des investisseurs étrangers, ils sont toujours biens présents en France… cependant le trouble causé par les négociations à propos du Brexit bloque de façon conséquente les capitaux en provenance du Royaume-Uni, une population britannique première sur le podium des acheteurs non-résidents en immobilier. Du côté français, l’immobilier devrait continuer sa croissance en 2019 avec une fiscalité encore plus propice à l’investissement (diminution des taxes d’habitation prévue).


French property transactions stabilise near record highs with outlook bright for 2019

Property Prices

Overview

2017 saw a record number of transactions in France at 960,000. This number has dropped only slightly to 957,000 in 2018. The forecast for 2019 would seem to be continued volume at these levels as the main conditions are all set to stay the same; ultra low interest rates, slow price rises and high turnover of property.

Slow Price rises

The average price increase across France in 2018 was 2.9%, which is a relatively slow and stable growth rate which we have been accustomed to over the past 20 years. Of course, there are always local variations and in recent times a lot of the stronger growth has been coming from Bordeaux and Lyon. Last year was no exception with Bordeaux registering growth of 9% and Lyons 6%. Paris and the other big brand name ski stations kept pace with the average whilst growth was more anemic along the Cote d’Azur.

Ultra low rates

The main driver of this continued growth across the majority of the country is of course the low interest rate offering which saw the average effective mortgage rate in France drop to its lowest ever rate of 1.5% in November. At the same time, the amount of outstanding loans in France has reached an all time high of just over 1,000 billion euros. At the time the rate of inflation in France was 1.9% meaning that the real cost of borrowing was below inflation which is a rare event in a rising market. Since then, inflation has fallen to 1.2% in January yet the 1.5% fixes available for 20 years at a net 70% Loan To Value still looks incredibly attractive.

High turnover of property

Paris is the standout example where demand is extremely high currently. In central Paris, agents have approximately 20 clients for the most common property search enquiry, such as a 3 bed property at €3M or a 2 bed at €1.8M. There is a lack of stock which is affecting buyers and agents alike with properties not staying on the market for very long, sometimes only long enough for a visit of the apartment by video link at which point an offer is made. The same is true for well priced, well located in many other regions where the Brits like to buy.

British buyers still number 1

Of the 957,000 transactions over 55,000 were made by foreign buyers, up to 5.9% from 5.7% the previous year. Whilst the number of Brits buying as a proportion of it is down from 33% in 2016, British buyers still account for 25% and, as they have been for the last 10 years, remain the largest group of international buyers in France representing close to 14,000 transactions each year. The reduction has most likely been the result of the EU Referendum but we can still see large strength from British based buyers with 65% of British buyers not resident in France at the time of purchase.

For more insights about the real estate climate in France and to receive advice on cross-border transactions and finance, don’t hesitate to get in touch.


How to Finance: Mixed €900,000 Mortgage in Èze

Eze Village

The Profile

Buying in: Eze, South of France
Property price:
€900,000
Mortgage amount: €750,000 + €150,000
Mortgage type: Interest Only + Repayment
Mortgage term: 2 years IO + 7 years repayment
Interest rate: 2.3% fixed + 1.16% variable
Loan-to-value: 100%

The Context

The client was a retired Doctor who has some property investments in both the UK and France. He was eager to buy a new villa in a small village called Èze near Nice. He already had a mortgage-free property in the same town, but had decided to upgrade. He did not want to sell the existing property immediately as the rental of the property was going well.

Having discussed the options with the client’s existing bank, we confirmed that the bank could not offer an interest-only product as in their view the net assets in his portfolio were not sufficient to match their strict criteria. Furthermore, they refused to consider a mortgage on a 20 years on repayment basis as the client would be over 80 years old at the end of the term – the maximum repayment age. We tried decreasing the duration of the mortgage, however, it was not possible due to the affordability ratio.The shorter the duration, the more the monthly repayments. As a result, the criteria of below 40% debt ratio was not met to support the new mortgage.

Our Approach

At that moment, we decided to apply for a mortgage with a private bank in Monaco. The private bank in question has no limit on age criteria and they are more relaxed about a clients debt to income ratio. Here, the bank looks at all the committed expenditure vs income too, however, when the ‘rest-a-vivre’ is more than a couple of thousand pounds a month, the bank will be satisfied that the client has enough money left over.

The private bank we’ve worked with offered up to 100% LTV with a side investment of 30% to be deposited with the bank. We could also look at a short-term interest-only bridging loan, as the client is intending to sell his other apartment in the same village. Because of the so called ‘promesse de vente’, the bank was happy to lend on an interest-only basis as they were satisfied that this part would be paid off by the client when selling the property. This has been provisioned for 2 years with a possibility of extending for another 2 years if the criteria were met.

The charge that is put against the property to be purchased as well as up to 30% LTV of the loan amount is asked in cash collateral. This acts as an additional security, but the idea is that the bank can show the client how they can grow the invested capital with the bank. Private banks look for the longer term relationship with their client’s and want to impress the client with how they manage their portfolio.

In the end, we’ve managed to place the mortgage with the private lender on split basis where the majority of the loan was put on to a interest-only part on a two-year renewable deal. As long as there is a secondary property to be sold in the near future, the bank is happy to renew the deal at their discretion. The 7 year repayment had a low-start initial period of 2 years – essentially an interest-only period before the mortgage switches to repayment. After that the month payments were increased.


How low can we go? Interest rates overview by Romeo Belli from French Private Finance

Interest Rates

Interest Rates Overview

Since the financial crisis of 2008, Central banks in the US and EU have maintained extremely low interest rates in an attempt to stimulate growth. Central banks fear that this is not sustainable and have been waiting to raise interest rates ever since. Overall, the banking sector remains weak with 30% of too-big-to-fail banks at risk of not meeting the stress test of the Financial Stability Board. This is evidenced by the low share prices of many banks and the existence of more debt in the balance sheets than 10 years ago.

However, last year, the US market showed some strength with strong economic figures such as unemployment. This enabled the FED to raise interest rates on two occasions. In both instances, global indices fell sharply leading investors to question whether we may have reached yet another top in the economic cycle.

We do not seem to be quite there in Europe where GDP growth rates are half of our American counterparts. The uncertainty around Brexit certainly has had its impact on the economic outlook of the EU. Furthermore, Mario Draghi probably won’t end his term on an unpopular note. Hence, we are unlikely to see an increase in rates in the near future. In fact, our main mortgage partners recently lowered their rates by a few basis points.

So, how low can we go?

Well, buying a property is definitely a long term play for most. Our recommendation is generally to fix the rate while you can. In an interconnected world where things move at lightning speed, it is difficult to forecast where we will be 2 years from now. Your parents may have experienced 15% + interest rates while they bought their first home and there is no guarantee we won’t get there again in the next 20 years which is the standard duration for a French mortgage fixed rate.


Cannes : Prêt de €285,000 In Fine

Le profil

Lieu d’achat : Cannes

Prix de la propriété : 475 000 €

Montant du prêt : 285 600 €

Durée du prêt : 7 ans

Type de prêt : In Fine

Taux d’intérêt : 2,55% fixe

Quotité de financement : 60%

 

Le contexte

Cet investisseur de fonds privés, aujourd’hui retraité, était préoccupé par l’idée d’obtenir un emprunt immobilier auprès d’une banque française. Avec plusieurs sources de revenus, y compris la rémunération en tant que membre du conseil d’administration de 3 sociétés différentes, il avait entendu dire à quel point les banques françaises peuvent être très strictes pour les emprunteurs aux profils financiers complexes.

Notre approche

French Private Finance a montré une attention particulière au dossier afin de s’assurer que celui-ci soit présenté de la manière la plus simple et compréhensible possible. Cela a impliqué de nombreux échanges avec notre client afin de faciliter la communication entre les deux parties, le tout en deux langues différentes. Le représentant de la banque n’a posé aucune question sur l’application car tout était claire, un rêve devenu réalité pour un courtier travaillant dans le monde du risque financier en France. Le client lui était ravi de notre efficacité et de la rapidité avec laquelle nous avons traité et présenté son dossier.

De plus, l’agent immobilier qui accompagnait l’acquisition de notre client était impressionné par notre qualité de service et par le fait que nous l’avons continuellement tenu informé de l’avancé du processus. Ainsi, il a aujourd’hui signé un accord de partenariat avec French Private Finance et nous recevons régulièrement le dossier de ses clients internationaux.


Deal or No Deal: How is Brexit affecting the French property market for UK buyers? by John Busby

Big Ben

Introduction

Whilst things remain uncertain in relation to the eventual form of Brexit, perhaps this is the beginning of the end of a period of uncertainty over the past two and a half years in the French property market for which British buyers make up the majority of foreign ownership.

In summer 2016, the French property market was buoyant with a strong pound and ultra low interest rates. Many British buyers were taking the plunge and buying a dream property in France, engaging in a new chapter in their family’s history. The Brexit vote caused the value of sterling to decrease by circa 10%, increasing purchase costs by this amount.

The effect of this increase in the upfront costs was mitigated by the low fixed rates on offer from French banks where you could still fix your interest rate at 2% for 20 years, thus many people have continued to purchase property over the past 2.5 years.

However, not all sections of the market were affected equally. The prime end of the market and those looking for a cheap and cheerful property were less concerned by this increase in real terms of the cost to purchase their property

The fact is that when you have the €280,000 available to purchase a prime property for €1m with 80% on finance, if the cost increases by 10% (€28,000), this is not necessarily going to stop the purchase in its tracks. Chances are that if you are looking at a property in this price bracket, you have the funds and the confidence available to continue with the purchase.

Likewise at the lower end of the market, where the banks have seen growing numbers of requests for loans in the €100,000 region in recent times, increases in initial purchase costs are perhaps only a few thousand euros and small enough not to be a factor relative to budgets and income.

It is the so called squeezed middle, whose aspirations for a property in France exceed what would be wise from a risk perspective given deposit and Brexit concerns, who have not had the confidence to buy in large numbers.

Brexit has been dragging on now for more than two years. A difficult negotiation has been made even more so by the high emotion which surrounds the issue. As we get to the business end of the horse trading, we will soon see the outcome or at least have some more visibility on the outcome to enable the middle of the market to begin buying in France at a higher volume.

Some scenarios

No Deal

In the event of a no deal Brexit, many of the agreements between the EU and UK would become null and have to be renegotiated. However, what wouldn’t change are the specific agreements which exist between France and the UK. These agreements relate mainly to double taxation and provide a basis for the ongoing relationship as they pre-date our membership with the European union and have been updated along the way. Of course a No-deal Brexit would be traumatic in the media and result in a tougher 2020 as businesses adjust, taking some time for the British economy to recover from all the bad press, the loss of income and the higher initial expenses.

Existing owners

The overall effect of a no-deal would be a lower value of sterling for an initial period and thus those with existing mortgage payments in euros would see the cost go up by another 10%. Of course, commensurately anybody who owned a property in France would see the value of the property increase by the same amount. This means we might see some more property come onto the French market in tourist locations which again might drive the price down a little, keeping the status quo.

Those seeking to buy in 2019

For people looking to purchase in France from the UK, a no-deal Brexit would push up costs on the purchase price by approximately 10%. A small amount to consider if you have found the property of your dreams and you can finance up to 100% of the purchase price (leaving 30% with the bank in a collateral), but a serious issue if funds are tight. For this reason, I would want to say that the lower end of the market might see falls in prices in popular areas but that would be tempered by the fact that we have seen a return of French buyers over the past two years  being quite active and looking for value in the prime tourist areas, exactly at this level between €300,000 to €750,000. Because of this, I am not sure we would see much of a change in property prices at those levels.

A deal of some kind, is the end in sight?

As we have seen recently, the risk of a no deal has been reduced with the UK Parliament taking more of an active role in the negotiations. This has lead to an increase in the value of sterling of roughly 3% in January. This is due to the fact that we have a relatively strong economy with a very low unemployment rate which can be invested in if we have some more certainty which in turn, will lead to higher interest rates and returns for investors in the future. In this scenario, the sterling will continue to appreciate, bringing down the cost of mortgage payments for existing mortgage holders and reducing deposit and property purchase costs for UK buyers. This should then bring the volume back to all levels of the market as we begin to get back to where we were in 2016.

Reversal of the referendum

In the event of a “People’s Vote” which resulted in the cancellation of Article 50, we should work our way back to 2016 levels, sterling at €1.35 to the pound and French property looking even more attractive. The ultra low interest rates will begin to disappear as Europe and the UK pick up investment and we all wonder why we wasted two years. There will still be some uncertainty caused by the Brexiteers complaining and asking for a best of three with a neverendum situation as they have in Canada, with constant talks and threats of a new vote which may be a bit of an economic drag.

Extension of Article 50

This option also seems quite likely and would simply preserve the status quo, perhaps it might strengthen sterling which seems most sensitive to the prospect of a No deal. This would continue things as they are. Buyers continue where deposit costs are not a factor and avail themselves of mortgages at 80% LTV and in some cases at 100% LTV (with 30% collateral with the bank). The truth is that many see buying a euro denominated asset as a hedge and security against a downturn in the UK’s economic fortunes.

 

Buy now or wait?

So to the question of what is the best thing to do. Well like any good adviser, I would say it depends entirely on your situation. If the place of your dreams has been found and you have the deposit for it and it does not present a risk to your family, then now is a good time with low long-term mortgage rates available. This advice stands at any stage of the market. The French property market is known for long steady growth rather than the boom and bust of the UK, so providing the mortgage is affordable, it is a good long-term investment to be enjoyed for generations.


3 French Mortgage Options by Romeo

French Bank

The Classic French Mortgage: Lock in long term value

The standard mortgage option in France is repayment. You pay both principal and interest which means that the loan will be repaid in full by the end of the term. Repayment mortgages are available on second home purchases, buy-to-let investment properties and main residences. This type of financing provides the most security to the borrower. In fact, it is very easy to budget for the payments as French lenders can offer fixed rates for the entire duration of the mortgage.

For those looking at holiday lets, the break even point is generally around 50%-60% loan to value (LTV). This means that the rental income covers the mortgage payments and you will own the property outright in 20 years time. Property is a great store of value; so, investors in their mid 40s can reasonably expect to triple their money by retirement age.

The Lesser spotted French Retail Banking Interest Only Mortgage

In our experience a finance professional will generally opt for an interest only mortgage – you only pay the interest and will owe the same amount of money to the lender at the end of the term. This option frees up capital and allows investors to seek higher returns in financial markets as well as lowering the cost per month. This means the property rental income covers the mortgage with less capital employed. For instance, a fund manager that can achieve a 7% annual yield will have nearly double his investment in 10 years time. If he makes 10%, interest payments on the French mortgage will be taken care of as well. Rental income on the property can be used to rebalance the portfolio or make early repayments on the mortgage thereby mitigating risk. Again, this option has some serious wealth building potential but requires a bit more skin in the game and is not suitable for the risk averse.

The Private Banking Mortgage

It is possible to get a 100% LTV in France. In this case, the borrowers only have to pay for taxes and fees upfront which are not financeable. This type of loan is offered by private banks who are keen on building relationships with high net worth individuals (HNWIs). The borrower will place a minimum of 30% with the lender as a collateral. The industry standard is around €1m in assets under management (AUM), though we can find options with a lower amount. Private banks can be flexible with the way they invest your money and clients can choose from a large range of securities as long as the overall asset allocation is deemed appropriate. This means that borrowers can potentially transfer an existing portfolio and keep the collateral in its original currency. So, disregarding the taxes and fees, you could get yourself a brand new property without any changes to your current financial position.


How to Finance: Paris 8ème and €370,000 Mortgage

Paris

The Profile

Buying in: Pqris 8ème
Property price:
€520,000
Mortgage amount: €370,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 1.35% fixed
Loan-to-value: 70%

The Context

Some banks, especially in the region of Paris, can be reluctant to work with non-residents.

They require the clients to have some history with France and a plan to live in France on the short-term. Basically, they have no issue financing a main residence but become hesitant for holiday home or investment properties. It is a shame as some banks have wonderful terms that could just create a whole new dimension on the Parisian property / finance market.

The client, a French entrepreneur who lives in the UK, was buying the last 2 floors of a Haussmann building to convert them into a duplex loft. The project was ambitious.

Our Approach

We were looking for the best rate possible at a high loan to value.

We have several contacts in Paris who could lend to our client with fixed rates ranging from 2% to 2.4% over 20 years. However, we found one who could offer 1.35% fixed for 20 years but solely to French nationals. We played the card that our client, though now living in the UK, was born and bred in France, that part of his business was made in France, that he already owned a couple of properties in France and last but not least, his father and grandfather each have had successful businesses in France. One could say that we provided the family tree, but guess what… it worked!

Having kept in touch with our client, he now informed us that he is selling the flat for 640,000 €. That is almost a 25% profit investment in less than 2 years. Well done sir!


How to Finance: €862,000 property in Courchevel

Courchevel

The Profile

Buying in: Courchevel, French Alps
Property price:
€862,000
Mortgage amount: €603,750
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.15% fixed
Loan-to-value: 70%

The Context

The clients are avid skiers with a young family. They have been going to Courchevel for many years and dreamt of owning a property there for years. The project that our clients decided to buy was an off-plan property with a rental option included. This rental option meant that the clients signed a lease with the property developer where they are going to manage and rent out the property for 9 years. This is even more popular practice in the French Alps, because the local authorities fear the investors will not want to rent out their properties in already supply-deprived ski resorts. This is why a percentage of these properties will be sold with a lease.

Whilst these practices ensure a steady increase of beds in the resorts, it is generally met with a more conservative approach from the lenders. They put the management companies through a scrutiny to see how they have managed properties previously. Their concern is that the property and project must retain, if not increase, in value over time. Moreover, in an event of a client default, it is much harder for them to sell a property with rental obligation or lease attached. This is the main reason why some banks choose not to lend on projects where the property developers and/or management companies are deemed not to have sufficient track record.

Our Approach

The client had more leeway in terms of deposit than usual and so we were able to secure financing on 70% LTV of the pre-VAT price. This means that the client had to put down a little bit more up front, but the overall mortgage was on the pre-tax price as the rest is organised by the developer. This meant that the mortgage amount was smaller and the repayments less, which in turn means that the mortgage payment is close to being covered by the income from the rental.


How to Finance: Saint Gervais and €280,000 mortgage

Saint Gervais

The Profile

Buying in: Saint Gervais
Property price:
€400,000
Mortgage amount: €280,000
Mortgage type: Interest Only + Repayment
Mortgage term: 20 years
Interest rate: 2.05% variable
Loan-to-value: 70%

The Context

This property professional borrower was looking to buy a piece of land and undertake a substantial new build project. The bank was asking for all the signed renovation contracts from each builder before printing the mortgage offer as it liked to have a good understanding of the whole project before releasing its funds. However, some works were only going to start  in 6 months time so the client could not/did not want to decide and provide these quotes before purchasing the land and getting started with the groundworks.

Our approach

With the clock ticking, and the risk of the property slipping through his fingers, we decided to finance the purchase of the land now and deal with the financing of the build later on. For this we required a bank that is happy to finance land only, which is a rare breed.

The client chose a mixed mortgage on a variable rate. For the first 7 years, the loan is on an Interest Only basis. After 7 years, the loan switches to a Repayment Mortgage over 13 years. As the client had other financial commitments, we wanted to keep the outgoings as low as possible on the French mortgage while still applying for the highest mortgage amount to help reduce any perceived loss on the exchange rate. This was made possible thanks to the interest only part and the high loan to value. The monthly payment on the repayment part of the loan was quite high but as the client would have paid off other loans before it kicks in, he was happy to proceed on this basis.


How to Finance: €285,000 Mortgage in Cannes

Cannes

The Profile

Buying in: Cannes, South of France
Property price:
€475,000
Mortgage amount: €285,000
Mortgage type: Interest Only
Mortgage term: 7 years
Interest rate: 2.55% fixed
Loan-to-value: 60%

The Context

This retired private equity investor was concerned about his ability to secure a mortgage with a French bank. With multiple income streams including remuneration as a board member of 3 different companies, he had heard about how strict French banks can be on borrowers with complex financial affairs.

Our Approach

FPF went the extra mile to ensure the file was presented in the simplest manner to the lender. This meant a lot of back and forth with the client to ensure it was easy to understand for a foreign bank. The analyst had no questions on the application, a dream come true for any broker in the world of French credit risk assessment. The client was delighted with the speed of the application once we had the application in order.

Furthermore, the property agent was impressed by our level of service as we kept him updated throughout. He went on to sign a partnership agreement with French Private Finance.


Tourrettes-sur-Loup / South of France: €1,172,325 Mortgage, 70% LTV, Variable Repayment, 1.75% capped, 15years

Tourrettes-sur-loup

The Profile

Property price: €1,674,750
Buying in: Tourrettes-sur-Loup
Mortgage Amount: €1,172,325
LTV: 70%
Type: Variable Repayment
Rate: 1.75% capped at + 1% for the first 7 years
Term: 15years

The context

Having made a gentleman’s agreement to pay the vendors in Sterling, speed was of paramount importance to this HNWI.

Our approach

We applied for 70% LTV to waive the life insurance requirement and secure the offer in just over a month.

The standard mortgage in France is a 20 year repayment fixed rate. However, our advice was to go for a 15 year term to reduce total interest paid. Such adjustment can easily save borrowers tens of thousands. So, it is definitely worth looking at shorter durations for second purchases when income is available.

Furthermore, the client opted for a variable rate to not have any early repayment charges. The capped rate allows you to reap the benefits of low interest rate while still providing security against future interest rate movements.


Newsletter December 2018

Season’s greetings,

In this month’s news we see how the French property market is holding up well with enquiry levels increasing as the winter season gets going in the Alps. We also find out that discounts are harder to come by, indicating a relative price strength in popular areas.

Rates are holding steady as you can see in our case studies, with some exceptional new low rates which are available if you place some savings with the French bank.

We also set pulses racing with our update on how to value your French Property for wealth tax purposes and the chances coming for the Impôt sur la Fortune Immobilière.

We hope you enjoy this update and the festive break.

All the best,

John Busby
Director, French Private Finance

Here is the link to access our Newsletter December 2018:
https://bit.ly/2sR9baP


Finding a solution for a HNWI buying off-plan in the Trois Vallées, French Alps

French Alps

The Profile

Property price: €1,720,000
Buying in: Courchevel
Mortgage amount: €1,720,000
Loan To Value: 100%
Mortgage type: Fixed Repayment
Rate: 2.15%
Collateral: 30%
Term: 15 years

For HNW clients, it is worth considering a private banking loan. Generally, the lender will finance 100% of the purchase price and require AUM (Asset Under Management) as collateral. The industry standard is €1m in lending in value. In fact, private banks are in the asset management business; hence, the loan is mainly a way to attract HNWI with the goal of extending the relationship.

Our Approach

We have several contacts with private banks where barriers to entry are less exclusive. Also, these banks can finance VEFA (off-plan property projects) which is rare in the private banking world. One of them was a great fit for this Ultra HNW client looking to buy an apartment from a prestigious developer in the Alps.
With over €85m of real estate investments and complex financial affairs overall, we could not apply for a classic loan with a French retail lender because they lack the know-how, and would not be comfortable lending when the borrower’s profile is not straight forward as well as the fact that the paperwork burden would be excessive. In contrast, private banks focus on the big picture. That’s not to say that they do not do their due diligence but the additional collateral gives peace of mind to the bank. In this case, it took 4 months for them to issue the mortgage offer.

The Process

Having done much larger property deals, the client was getting concerned at times throughout the process. However, it is no secret that things move slow in France and the process generally takes longer for non-resident buyers, especially when their situation is outside the box. By maintaining constant communication with the client and educating him on the underwriting process, French Private Finance kept his trust throughout and he was very pleased after meeting with the private banker.
The client opted for the security of a long term fixed rate mortgage as this is one of the most attractive options available in France.


New French Property Wealth Tax: Why not to under value your property?

French Property Wealth Tax: How to value your property?

The latest iteration of the French wealth tax in France, L’impot sur la fortune immobiliere (IFI) came in force in December last year focussing this tax on net property assets only and excluding financial assets from the overall French wealth tax calculation. This tax will generate far more that the predicted 850M initially. French sources suggest 1.2BN this year and 1.5Bn in 2019! Good work it seems from Monsieur Macron.

The main reason for this increase is that property owners are increasingly likely to reevaluate the declared value of the property which will lead to the tax windfall. The main driver for this comes from the upcoming anti-fraud law due to be passed in 2019 which will penalise owners for undervaluation of their property to reduce their tax bill.

What are the main ways to value a property in France?

The main and preferred method to value a property is the comparison method which establishes the market value by looking at recent sales of similar properties in the area local to the property. For buy to let properties, the rental yield can also point to a value for the market value by looking at what the property is renting and taking the average yield from similar properties and extrapolating the price at which a property could be sold in this manner.

A simple valuation of the property costs in the region of €1000 to €2000 depending on the purpose of the valuation. The survey is usually undertaken by chartered real estate professional in France who could be either an estate agent, surveyor or even a Notaire, though it is important to note that a professional valuation is not required for the wealth tax declaration. It is possible to simply ask an estate agent for a report on value which can usually be procured without payment.

What allowances are made?

It is normal practice for properties held in either SCIs or SARLs to benefit from a reduction of 10-15% in the value of the property as the property is deemed to be slightly less liquid. It is important to check your declaration and any reductions with a tax specialist.

What are the potential risks?

If an error in the valuation is found during a check of the property by the tax authorities then the size of the gap will be important. Less than 10% and all should be fine, more than 10% and penalties can be imposed not only for the year in question but the previous three years. In addition to late fees, a further penalty of 40% to 80% of the amount of tax which is being recovered may also be levied. If you have failed to declare the property at all, then the sanctions can be even greater with the tax authorities going back 6 years and the likely additional penalty being nearer the 80% mark especially in cases where bad faith can be established.