February 2017 – French Mortgage Transaction of the Month

This month’s French mortgage transaction of the month highlights the renewed trend of international clients taking mixed French mortgages; half repayment, half interest only, instead of simply repayment only.

Mixed French mortgages are a clever way of reducing the amount of interest you pay overall by structuring your mortgage in a way that enables early repayments without paying the sometimes-costly early repayment fees that are associated with long term fixed rate repayment mortgages.

Interest only French mortgages often allow for early repayments without penalty fees, so by taking half of the overall lending on an interest only product over 14 years, the buyer has a large chunk of the lending which can be paid off early.

It was this structure that a client opted for recently for an €800,000 three bedroom apartment in the Portes du Soleil, in a resort that’s very popular with the British.

In addition to having the ability to pay some of the mortgage off early, the client also preferred that the overall monthly repayments would be lower, due to the lower monthly payments on the interest only part of the mortgage.

This trend is often an indication of positivity in the financial circuits, with those opting for a mixed mortgage often expecting a windfall from bonuses. Though we often see buyers selling an existing property elsewhere to facilitate this.

To see if a mixed French mortgage could work for you, please feel free to get in touch with one of our French mortgage experts today.


New-build property: France’s new-home market shows great form

New figures for France’s new-build property market demonstrate renewed confidence in this sector, with sales jumping by 23% in December compared to the same month in 2015.

After the slow year of 2014 the new-build French property market, often the yardstick for consumer confidence in the property market as a whole, these figures are reassuring. Year on year, 2016’s sales rose 19.5%, compared to +13.7% in 2015.

Looking at the numbers on a quarterly basis sees them rise even higher, with Q4 seeing a 28.4% jump compared to the same quarter the previous year.

Domestic market supports growth, underpinned by secure incentives

Patrick Vandromme, the President of LCA-FFB, the French housebuilding federation put it down to the alignment of ‘planets of the property sector’. “We are benefiting from an alignment of the planets: between the low rates, the success of the zero-rate loan [which worked very well for the domestic first time buyer market], the Pinel tax exemption system and recovering household morale.”

Positive outlook for 2017

2017 is expected to continue in this fashion, with sales supported by still low, though slightly higher, French mortgage rates. Next year, 2018, is a worry for some if interest rates continue to rise and also domestically, if the government were to cut down on current housing subsidies.


France’s online property rental market explodes in 2016

Such is the advent of property rental market technology and services, it has never been easier for home-owners in France to rent out their property to the international and domestic markets.

With so many now renting their property through easy-to-use accommodation sharing websites, the French authorities are now starting provide official figures for this increasingly important part of the tourism sector.

According to a study carried out by INSEE, the French office of national statistics and rental unions across France, the ‘online property rental market’ would have represented 25.5 million overnight stays in 2016 (including airbnb).

This figure, taken from the statistics provided by the websites that just link homeowners and tenants (Abritel, Leboncoin, Homelidays, Airbnb, etc), demonstrates a 30% rise in one year. This represents 16% of the total accommodation market.

The onset of this market is no surprise and is the core reason why many hoteliers and certain municipalities, especially those in Paris, have been trying to curb the phenomenon.

The French go digital – they continue to holiday in France

There were findings from the study that did raise an eyebrow though. It showed that these high numbers of tourist rentals were being taken up by French (66%) rather than foreigners clientele and that 80% of the number of visitors would come from dwellings located in provinces other than Greater Paris.


Low French mortgages rates boosted new-build property construction in 2016

The new home construction industry in France had an amazing 2016. Around 376,500 new homes were built last year, 10.4% more than in 2015, according to figures released this Friday by France’s Ministry of Housing.

Building permits granted for new homes jumped by 14.2% in 2016, to 453,200 units. Both sets of figures were obviously welcomed by Housing Minister Emmanuelle Cosse.

Exceptional borrowing conditions for both domestic and foreign purchasers had a lot to do with this. In France mortgage rates, including those secured for domestic buyers,  stood at 1.34% on average in December, according to the Crédit Logement / CSA observatory.

These conditions allowed an increasing number of households to secure better rates and pay of large chunks of their remaining mortgage amounts. As a result property loans experienced a “strong rebound” with the number of secured new loans reaching a new record.

To calculate what you could afford to borrow in France, get in touch with one of our expert brokers today.


Rental: agency fees down sharply in the Paris region

Good news for the liquidity of the Parisian rental market; the cost of agency fees paid by tenants for new lets has dropped markedly. For a one bed apartment of 40 m², the tenant is now not allowed to pay more than €600 of agency fees compared to €1,000 euros previously.

For over two years, rental agencies in Paris have been obliged to cap the rental fees received upon the closing of a new lease.

Whilst this is obviously bad news for some in the industry, the reform – which follows the Alur law (Act for access to housing and renovated town planning) – aims to reduce the cost of entry into the housing for those using a real estate agency.

It is therefore hoped that this will increase liquidity in the market, therefore helping both the tenants and prospective landlords who have been stifled somewhat by rental rate caps themselves.


January 2017 – French Mortgage Transaction of the Month

Going against the grain of the seasons, this month’s French mortgage transaction of the month takes us away from the wintery alps, to the warmer climes of Dubai and Cannes.

This was the third purchase in the last year by our client, who is based in Dubai and has moved quickly to secure rates whilst they’re at their lowest.

Unlike the first two properties, which were in the Three Valleys ski resort of Méribel, this one was in sunny Cannes at a price of €1.8m with a 60% LTV securing a loan of €1.08m. This was over a 25 year fixed period on a repayment basis, with a rate of 2.45%.

We often speak to clients based in the Middle East who’ve had trouble accessing French property finance as banks sometimes feel less secure about lending to someone far away.

There’s a simple solution though – investing through an SARL. An SARL or Société à Responsibilité Limitée, is a limited liability company, particularly suited to small/medium family-run businesses. By starting an SARL you are creating an official company registered in the French tax system, which at the most basic level simply means that when a Bank sends you correspondence, they have an official address, not a personal one, that they can know 100% that correspondence will be delivered to. It is then the business owners responsibility to make sure they pick up their mail.

With this of course there is also the normal full due diligence carried out through the full application process.

For further information on buying French property through an SARL or French mortgages in general, please get in touch.


Paris remains one of the five favourite cities of the ultra wealthy

What is an UHNWI? Men and women whose financial wealth exceeds $30 million have their very own acronym. UHNWI, the Ultra High Net Worth Individuals of the world have doubled in numbers (212,000 across the world) over the last twenty years. It’s the ‘U’ that makes all the difference, since HNWIs, the High Net Worth Individuals, “only” now have a million dollars and above.

According to a recent report by Wealth-X research, the UHNWIs prefer to target five particular places around the world.

Despite Brexit, London tops the list, closely followed by New York, both where luxury apartments prices have fallen for several months. Next comes Tokyo, then Sydney where the Chinese are now active investors. Paris finishes this top 5 and here prices can still be half as much as in London, with prices up sharply in recent months.

  1. LONDON – The British capital remains at the top for the ultra-rich despite Brexit. London still attracts people through its cultural wealth, luxury brands, its education, easy mobility, limited risk of investment and its economic makeup.
  2. NEW YORK – The big apple boasts the biggest concentration of UHNWI’s fortunes. Owning a property in Manhattan or even on Central Park remains their most common dream.
  3. TOKYO – The most important economic metropolis in the world is attractive due to its concentration of luxury brands and high-level dining. It will also host the 2020 Olympics.
  4. SYDNEY – Teaching excellence, economic and financial dynamism, audacious architecture: these are just some of the assets of the Australian metropolis.
  5. PARIS – The quality/price ratio remains excellent for big budget buyers and here they can enjoy one of the most visited capitals in the world, endowed with incredible architectural heritage.

 


French property transactions back to 2006 levels, prices on the rise

Real estate prices are rising in France. In the third quarter they were up across the country for the third time, but this time more sharply. Properties went for 1.7% more on average than in the 2nd quarter (after + 0.6% in the previous quarter) representing a resurgent and dynamic market.

This price rise has been encouraged by historically low mortgage rates, encouraging a growing number of households to go ahead with purchases now whilst the rates are down low.

Notaries registered 838,000 transactions for the year to end September, against 755,000 a year earlier, a sales volume that exceeds the historic high levels of 2006 and early 2012.

The notaries have confirmed that this recovery began in spring 2015. “This improvement is corollary to higher prices,” they noted.

This trend is particularly pronounced in Paris , which is often a precursor to the growth of prices across wider France. In the capital, transaction volumes have also reached high levels, comparable to the boom years of 1999-2006.

These are 10,000 sales that were made between July and September, 11% more than the previous quarter.


November 2016 – French Mortgage Transaction of the Month

If USD buyers are currently enjoying unprecedented buying conditions in France, then for Sterling things have tempered, mainly due to the weakening of the pound.

However some buyers are still pushing ahead, citing the fluidity of the market as the main impulse for buying. One recent purchaser who has just reserved a three bedroom apartment in Châtel in the French Alps knew that even though the currency rate isn’t on his side, it made sense to move ahead quickly.

“The pound might be down, but for buyers in euros that doesn’t matter,” said Mr Jackson, of Aintree, UK. “The French and Dutch are still buying, as are the rest of the Europeans. They’re looking for opportunities where Brits have fallen out of the market. From what we experienced, ski resorts are still buyers’ markets and opportunities do not hang around for ever. We therefore decided to take the hit on the pound and it was softened anyway by a low long fixed rate. We took an 85% loan to value and may pay some of it off earlier if the currency shifts back over the next 12 months.”

To talk about your options and how to plan around the recent shift in currencies, please get in touch with one of our French mortgage experts today.


French mortgage rates drop to 100-year lows – now ‘€58,000 cheaper’ than in 2014

French mortgage fixed rates have just dropped below 2.0% for the first time in 100 years. The value you can now lock in on a long-term fixed rate repayment mortgage is unprecedented for modern times.

Rates for a 20-year repayment mortgage with a loan-to-value of 80% have crashed to 1.85% fixed for the duration of the loan. This is available to the majority of non-residents buying across France, with some localised rates going even lower. This means that, with a modest rental yield of 3-4%, international buyers can more than cover their interest payments and also pay down some of the capital too.

For British buyers, this dramatic drop in rates offsets the change in exchange rate with today’s GBP/EUR rate only circa 5% below that of two years ago. Mortgage rates have dropped from 3.10% in September 2014 to 1.85% today. This means that the interest payable over a 20 year term has fallen by 42% in the same period.

french-mortgage-rates

On an average loan of €400,000 current buyers are saving just over €39,000 in interest payments over the course of a 20 year fixed rate mortgage on a loan-to-value of 80%, which is roughly €10,000 per every €100,000 borrowed. People who were previously buying in cash are now using finance to manage the loss in currency values, hedging against future exchange rate movement.

On the whole, these rates are underpinning British demand in France, especially in key locations like the Alps and Paris. For buyers using USD, the French market is currently even more attractive, with the perfect combination of ultra low interest rates and a very favourable currency creating incredible buying conditions. Staple areas like Paris and the big towns along France’s south coast are being targeted heavily by those buying with the dollar.


How well off are the French in real estate terms?

Compared to their european neighbours, the French devote amongst the lowest amount towards real estate, largely due to the benefits of low French mortgage rates.

A study by the Credit Foncier examined the respective weight real estate has in the budget of European households and reviewed various aspects of national markets.

Month to month, the French devote just 18.3% of income towards property, against a third for the Dutch and Germans, and a quarter for the British. Only the Italians spend less than the French in real estate expenditure.

Why is this the case? These differences are largely explained by the proportion of tenants in the private sector and also the number of owners who have not yet paid off their loans. These two categories of people are those who spend the most on housing and in France and Italy these are few in number compared to elsewhere in Europe.

In Italy, more than half of the population are outright homeowners with nothing to repay, thus explaining why Italians spend the least on housing. This high proportion is linked to a very strong culture of ownership, particularly in the South, and the fact that many become owners through family inheritance and bequeathment.

In France, 10% of the population has finished paying their mortgages. In addition, 15% of the population receives subsidized rent via social housing (against 10% in the EU), which explains why the French spend on average rather less than their neighbours.


Airbnb, Abritel … how to legally rent your French property to tourists

Tourist rentals in France can form a considerable part of a property’s income and increasingly this type of activity is becoming less amateur.

To avoid unpleasant surprises and fines here’s what you need to know.

Renting your main residence

Only a really option for those who have made France their main home, this is the simplest way of renting your French property because renting a main residence is always legal and is possible without any formalities. A ‘principal residence’ is a residence that is habited for at least eight months of the year by its occupant or a spouse or a dependent. It is therefore perfectly conceivable to rent its main residence throughout the summer or even every weekend of the year but must not exceed four months of rentals per year.

Renting your second home

Things get tougher when you rent your second home or a home that was bought specifically for secondary purposes. First, the formalities: make a declaration of your intentions (using form Cerfa No. 14004 * 02). This document serves to identify you as someone who pays the tourist tax, which is paid by the tenants (the tax you’ll remember paying when leaving a French hotel). Undeclared residences face a fine of up to €450.

Things can be a bit more complicated in certain cities: communes with more than 200,000 inhabitants, those in inner Paris and those with more than 50,000 habitants in ‘tense zones’. Here, it is necessary to gain authorization from the local municipality to modify the recorded use of the accommodation in furnished houses to become loosely a ‘commercial’ entity. It can be hard to gain this authorisation, which is why some are moving directly towards the purchase of habitable commercial surfaces.

Renting a ‘commercial’ space

To avoid the constant worry about being found out by the authorities, some real estate agencies refer investors to homes regarded as commercial spaces. There are not many but these spaces prove perfectly habitable without too much work. And if they are well located, they lend themselves well to the tourist market without the legal woes.

If I am renting myself

Risky but not impossible. If a tenant wishes to sub-let his house whilst he’s not there, a tenant must inform his owner and obtain his written consent.


Good signs – French construction market regaining strength

In just one year, the number of new-build properties sold jumped 18.7% (June-June) in France signifying a nine year high for the French construction market.

France’s Ministry of Environment has published some compelling figures on the sale of new-build properties in France confirming the newfound health in the property market.

Just over 33,000 units were sold in the second quarter, a jump of 18.7% compared to a year ago. At the same time, the number of homes for sale has increased by 24.2% to 35,900 units, its highest since 2007.

Broken down by property type, the increase in sales totaled 18.1% for apartments (30,300 units) and 26.8% for detached houses (2,800 units). It’s worth noting that whilst sales have increased, the volume of stock has remained the same, unchanged at 92,600 with the increase in sales significantly reducing the reduced the available supply.

This will no doubt continue the creeping trend of rising house prices, a relatively new thing for the French property. Selling prices, meanwhile, have changed little over the year, up 0.3% to an average of €3,930 per square meter.


June 2016 – French Mortgage Transaction of the Month

USD buyer utilises double benefit of mortgage & currency rates

A late entry for June’s transaction of the month. Strictly speaking, this is still a pending transaction but we had to showcase it simply due to the huge value in the numbers.

Our client, based in the UAE (where the Dirham is pegged to the dollar) had his buying power boosted by 4% on the euro overnight after the referendum. Even before the Brexit referendum announcement, USD had become over 22% stronger on the euro since this time in 2014.

Whilst fixed rates for non-residents across the board are now down to around 2.15%, if the property is in Paris it is possible to negotiate even lower rates. French banks often feel more secure about lending on real estate that is located in markets that have strong domestic and international appeal. Paris is at the top of this list, closely followed by large resorts in the French Alps, where tourism underpins the market.

We are negotiating a rate for him of 1.55% fixed for 20 years with a loan to value rate of 80%. The loan value is around €600,000 and his ability to move quick on both the currency and mortgage rates is going to secure him huge amounts of value over both the short and long term.

For those looking at buying property in Paris, these preferential rates are dependent on the buying profile. Generally as a couple, gross income needs to be in the region of €100,000, with a single applicant requiring €70,000 income before outgoings. Working for a large internationally-known corporation is also prerequisite.


Greater Paris leads the way for new property construction

New home construction rose 3.8% to 86,200, the period from March to May, compared with a year earlier, according to the latest figures from France’s Department of Housing.

Permits for new buildings surged 12.1% year on year, to 99,600, over the same three months, the ministry said in a statement. Broken down by type of construction, new construction on houses rose 2.6% to 80,200 units.

Building permits double in Corsica

By region, it is in Ile-de-France (Paris’ ‘Greater London’ equivalent) that new housing construction posted the strongest figures. Here new home construction was up 26.1% on the 12 months ending in late May, to 67,800 units.

The next biggest increase was in Corsica (+ 21.6%, 3,700), with the Loire area also posting a big increase (+8.6% to 22,800). In contrast, other regions have slowed – the Nord-Pas-de-Calais and Picardy (-15.6%), Alsace-Lorraine-Champagne-Ardenne (-6.9%) and Normandy (-5.3%).

Nearly 385,000 homes are expected to be built in 2016 across France, representing an increase of 10% in the new housing market. Industry figures put this largely down to the incredibly low interest rates still and state support measures for certain domestic buyer demographics.