French Mortgage Tips

As we hit the busy ski season and many property hunters look to evaluate their budget for buying that dream French ski property, here are five top French mortgage tips to consider when looking to acquire finance in the France.

1) Prepare to show ‘rainy day’ funds

Just like in the UK there are additional buying costs on top of the deposit capital you are putting into the property. French banks will also want you to demonstrate that there is a buffer after this i.e. ‘rainy day’ funds, so that if anything unexpected happens the bank knows you have the means to handle it.

2) Understand eligibility criteria

French banks are keen to lend to foreign investors provided they meet the lending criteria. However French authorities do not have access to credit scoring data which means applications are assessed on proof of income. Three years tax returns and three months income is required for employed, with three years required for self-employed.

3) Get professional advice

One of the main reasons French mortgage rates are so low is that the banks are competing heavily for buyers. As a result, an international broker specialising in French mortgages for non-residents will be able to offer products which are better than if a buyer was to go direct, a no extra cost.

4) Be confident of rental returns

For leaseback properties and also standard buy-to-let properties, make sure you are confident of the returns, especially if you are factoring these into your mortgage payments. For leaseback properties, banks take the projected returns into account when considering the application, but you also need to be confident of the property’s ability to generate the rental income.

5) Understand the system

The French mortgage system is more regulated than in the UK, but this is what makes it so secure and is part of the reason why they can offer such low rates over such long terms. Of course, this can sometimes mean the application process takes a bit longer, but in the end it will be worth it.


New report: French Alpine property market stable

The Chamber of Notaries of Savoie and Haute-Savoie recently published a summary of the situation of the French Alps real estate market. First observation: the French property market in the Alps is holding up relatively well in a difficult wider market context. Remember that recently the Chamber of Notaries of Ile-de-France announced a decline in the French real estate market of 1.1% for the third quarter of 2012.

The Alpine market is also going well in terms of volume. The overall decline in transaction numbers is very low (-2%) and prices remain steady. However, the study from the database used by Notaries of France, Perval, does not provide any overview of the market for Savoie and Haute-Savoie. It only offers a simple focus by mountain range Aravis, Mont Blanc, 3 Valleys, Haute-Tarentaise, Chablais and Maurienne. The report distinguishes existing flats, from new build and existing chalets. In fact establishing an average over the entire region would be unreliable as the difference is too big between mountains ranges.

Wealthy buyers

The relatively healthy market in the northern French Alps reflects the high-end properties available and the increased presence of foreign buyers. This is a rather affluent clientele that come from around the world, not only from Europe according the study for the period from September 2011 to August 2012.

Note that Winter tourism now accounts for more than 6 billion euros in the Rhône-Alpes ski resorts. 85% of this amount is concentrated in Savoie and Haute-Savoie.

 

656,000 euros for a chalet in the Trois Vallées

The average price per square metre for existing apartments is between 2,617 euros in La Maurienne and more than 10,000 euros in the best resorts. New build prices jump, it costs an average of 5,544 euros per square metre in La Maurienne up to 7185 euros in Le Mont Blanc. Average price for an existing chalet reaches 656,490 euros in Les Trois Vallées. La Maurienne is comparatively three times cheaper.

For instance in Morzine, the average price per square metre increased by 12.8% year on year, reaching 4,711 euros. On average, Le Chablais has seen existing flats decreased by 8.7% but existing chalets have increased by 5.7% on the same period, to reach an average of 300,000 euros.

Popular buys are one bedroom apartments and chalets around 320,000 euros which quickly find buyers.

Another trend is to see sellers gathering several studios into one larger flat. This recent phenomenon allows owners to better sell their property. For example in Avoriaz, a developer has done more than 200 million euros of renovation work in small studios aka “rabbit hutches”.

 

13% are foreign buyers

In “Les Trois Vallées”, the situation changes depending on the ski resort. In Courchevel 1850, average price of apartments fell by 4.9% this year to 11,170 euros per square metre. But Meribel increased by 15.1% over the same period to 7.239 euros per square metre.

Usually buyers are between 30 and 59 years old and live outside of Paris. Over the study period, foreigners represented 13% of buyers. They were 21% between September 2006 and August 2007. They come mainly from Great Britain and Switzerland. If the share of English has declined compared to the situation before the subprime crisis, they eventually return, especially in Le Chablais and Les Trois Vallées. Russians are now famously some of the biggest buyers of property in the French Alps.


French Capital Gain Tax discount for 2013 to be reduced

Another change to the French property tax rules.

The French Senate has adopted an amendment to the 2013 French Tax law reducing the rate of the exceptional discount from 20% to 15% on the capital gains tax levied on the sale of a second home or a land to build in 2013.

Introduced by Senator Marc Francois, the amendment aims to help the government to avoid the loss of 285 million euro in tax revenue. According the amendment, the reduction in the allowance will moderate the cost to the French government of the  property tax discount without undermining the incentive to boost the French property market.

Overseas buyers  are still enjoying the best French mortgages rates for many years and with rates predicted to remain stable over the course of the next year, the future looks bright for those seeking to buy a property in France

 


China is investing the Parisian property market

It is now the turn of the Chinese government to invest in the high end Parisian property market. The China Investment Corporation is currently looking for investment opportunities in the heart of Paris and the $410 billion sovereign fund is attracted by the higher yields provided by the French estate market. Starting from zero, China has become the second foreign investor in Parisian real estate. The Chinese Corporation now accounts for 15% of the total amount invested by sovereign funds just after Qatar which represents 30% of the French market.

China has made the biggest property deal by buying a property portfolio of 508 million euros earlier this year, partly composed by offices and luxurious properties located in the heart of the French capital. The expected yield for prime property market now stands at about 4.75%, a little higher than mainstream financial assets.

 

The China Investment Corporation has chosen to focus a larger part of its investment strategy in Europe, after a 4.3% loss to its global portfolio in 2011, investing in prime properties in both Paris and London. Of course the Asian and Middle Eastern investments will remain the largest part of the portfolio. This trend is a good indicator of stability and profitability for those who want to invest in France as private money often follows sovereign wealth money which is a good indicator of stability in the market. For those with more modest budgets than the CIC, French mortgages allow you to buy a property at rates below 4% with a minimum deposit of 15% + stamp duty and mortgage registration tax.

 


Finance Act 2013: real estate tax exemptions will be spared

2013 promises to be a good year for real estate investors in France. After seeing the tax reductions from the “Loi Scellier” diminish each year, the latest announcements and rumours spread around the future Finance Act 2013 suggest that the coming year will be particularly good for those who wish to invest in France as these tax breaks will support the market.

The renewal of the “Loi Girardin” for housing in the Dom Tom, the overseas departments and territories of France, will see the continuation of a tax deduction capped at 18,000 euros for investors fiscally resident in France. The “Loi Malraux”, for investors in Historic Monuments, will also be renewed under the same conditions. Finally, the “Loi Scellier”, which was so popular and helped keep transactions numbers up over the past 3 years, will be discarded in favour of a new law which will have a tax benefit capped at 10,000 euros.

 

As the majority of the existing tax laws will be maintained, investors will benefit from as many tax reductions in 2013 as 2012. The French government has decided to take a little more time to take the full measure of the housing market and levers at its disposal to stimulate the construction of social housing. The tax incentive to increase the sale of construction land, which was recently passed by the National Assembly, will lead to the creation of new housing in 24 to 48 months. The Hollande Government think it is necessary to maintain the current tax advantages for investment in property for rental until the increase in new property construction kicks in as more land is sold for construction.

In this tense economic climate, it is likely that 2013 will be the last year to take advantage of significant tax cuts on investment in private rental investment for those fiscally resident in France. The Duflot law should allow French investors to get an interesting net investment profitability despite the capped rents provided by the law. This activity will help to support the French property market and French property prices. For the international investor, France continues to offer an attractive mix of soft property prices and French mortgage options at extremely low rates.