France – still a buyer’s market

When it comes to news about overseas property investment, France has taken a bit of a back seat over the last few weeks with Spain dominating the headlines as a result of banks and estate agents slashing prices in an effort to offload the huge glut of unsold properties.  Fair enough – it’s a really good time to pick up a bargain, as long as you choose wisely and seek the right advice. 

But France also offers a wealth of opportunity for the canny investor. According to figures from FNAIM (The National Federation of Property Industry Agents), there’s been a 3.6 per cent fall in property prices in France in the first half of 2013 compared with the end of June 2012.  Standard and Poor’s and Morgan Stanley both predict that prices will fall by five per cent this year and again next year, while UBS sees them dropping back by as much as 10 per cent in total with most of the slide coming this year.

These are ‘average price’ statistics, of course, and it’s important to remember that there many micro-markets within France which are bearing up better than others. But when you combine lower prices with the exceptionally low mortgage rates on offer right now, there may never be a better time to buy.

At the time of writing, rates are at their lowest in more than 50 years, starting at just 2.1 per cent for a variable deal over 10 years, 3.0 per cent for a capped deal, and 3.5 per cent for a 25-year fixed deal.  All three examples are available for mortgages of up to 80 or 85 per cent loan-to-value.

France has been surviving the global financial storm pretty well, but French lenders have understandably become a little stricter about whom they lend to. That said, mortgage availability is still generally good, although one of the biggest changes is that they’re no longer relying on specific criteria. It’s much more about the individual case and what/where you want to buy. But they’re still willing to lend, particularly if you can prove that you’ve got a sound financial profile, and they’ll require more details about your income and outgoings, so it’s important to have your accounts in good order

More good news is that President Francois Hollande has recently announced a change in the capital gains tax system on second home sales in a bid to boost France’s property market. From 2014, the taper relief system is to be amended so that the required time of ownership before a property is exempt from CGT will come down from 30 years to 22 years.

Uncertainty over potential tax changes in the second half of 2012 led to a fall in demand for property in France, but this caused prices to drop and resulted in foreign buyers being enticed back. The CGT change should encourage even more buyers to take advantage of the favourable conditions open to them.

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