La crème de la crème – As featured in the Jan/Feb 2016 edition of Your Mortgage magazine

France remains the top choice for Britons investing in overseas property, and there’s never been a better time to buy, explains Clare Nessling

If you’re thinking of buying a property in France, you’re going to be truly spoilt for choice. Whatever your budget and preferred location, the country offers a plethora of options, with its 22 regions offering their own unique appeal, from the chic elegance of Paris to the glamorous Cote D’Azur in the South. And with prices generally remaining well under UK averages, it’s safe to say that there really is something for everyone.

It’s perhaps no surprise, therefore, that the country has accounted for almost half (46 per cent) of our enquiries over the last couple of months, overtaking Spain again for the first time in almost a year. A sluggish market, the growing value of the pound against the euro and the lowest mortgage rates in more than 60 years are making it affordable than ever to snap up a property across the Channel. And buyers are taking full advantage.

Ski properties on a high

The Dordogne, in the Aquitaine region, has been a traditional favourite largely due to its long-established expat community which is a magnet for many British buyers. The resorts of Cannes, Marseilles and Nice, located along the southern Mediterranean coast in the region of Provence-Alpes-Côte d’Azur, are also long-time hot spots but can be expensive compared with other regions.

The region drawing most buyers by far, however, is RhôneAlpes, one of the most prosperous parts of France and most famous for its Alpine ski areas. Over the last few years, this region has accounted for a huge 44 per cent of mortgages taken out through Conti, and Haute-Savoie, where popular resorts such as Chamonix, Morzine and Les Gets are located, is top of the list. The French ski market is popular with the British but is also very well supported by the domestic market, making rental opportunities good, but it’s also very accessible by air, train and car.

Property prices

According to Notaires de France, the national average house price in France is €156,000 compared with around €287,000 (or £205,000) in the UK*. There are, of course, very wide regional variations, the cheapest including Limousin and Burgundy where the averages are €105,000 and €120,000 respectively.   

Figures from the statistical office of the European Union, Eurostat, indicate that house prices fell by 2.2 per cent between April and June 2015, compared with the same period in 2014. There are similar findings from the Knight Frank Global House Price Index which quotes a 2.3 per cent average decrease over the comparable period.

Market research agency Standard & Poor’s, however, expects the combination of economic recovery and low interest rates to allow French real estate to bounce back. It’s expected to stabilise in 2016 and begin a slow increase in 2017, which is good news for anyone thinking of entering the market now.  Current market conditions are, in fact, very good for prospective buyers, with some excellent deals to be made. And there’s plenty of room for price negotiation with some very motivated vendors.

Obtaining finance

There’s no getting away from the fact that French lenders have tightened their mortgage eligibility criteria in recent years, but they’re still willing to lend to UK buyers, especially if they can prove that they have a sound financial profile.

Mortgage rates are still at historic lows, starting at just 2.05 per cent for a 10-year fixed rate, 2.20 per cent for a variable rate over 10 years, and 2.5 per cent for a 15-year fixed rate. Fixed rates over periods of up to 20 years are popular as it means there are no nasty rate rises over the lifetime of the mortgage. And the best rates are not limited to those with the biggest deposits. Many of these deals are available for mortgages of up to 80 or 85 per cent loan-to-value.

Obtaining an ‘approval in principle’ is something we always recommend. This costs nothing, but will tell you up front about how much you can borrow, and therefore what price range you can realistically consider before committing to anything. It will also prove to vendors that you’re serious about buying.

Exercise caution

It may be a great time to buy property in France, but as always, it’s imperative to do things right. Bitter experience has taught many investors that scrimping on independent legal advice can effectively cost them their holiday home. You should always go through the same process that you would follow if you were buying a property in the UK. This means taking independent advice from an English-speaking lawyer who is not connected to your seller, estate agent or property developer.

 Case study – ‘It was easier buying in France than in the UK’

Calum Maxwell, aged 44, from Glasgow, together with his partner, has just completed the purchase of a one-bedroom apartment in the centre of Nice, on the Côte d’Azur.

“We’ve been taking holidays in the area for some time, and we have a friend who already owns a property there, so it was the natural choice in terms of location,” says Calum. “We plan to spend as much time there as we can, but we’ll also be renting the property out to holidaymakers in order to cover costs. It’s an investment too, however, so hopefully we’ll benefit from some capital gains over the long term.

“When it came to price, we managed to get a really good deal. The strong pound was definitely helpful, but we were also able negotiate with the seller and managed to pay €20,000 less than the original asking price. A great result.”

The couple arranged their mortgage through Conti and opted for a euro-denominated mortgage as they’ll most often use euro rental income to make their repayments, thus avoiding any issues with exchange rate fluctuations. They put down a 20 per cent deposit and opted for a mortgage rate of 2.9% with a 1.5% cap (which means that the rate won’t exceed 4.4%, regardless of what happens to interest rates) for the first 10 years and a total term of 25 years.

“I would definitely recommend using a specialist broker,” says Calum. “They were able to source the best possible deal for us, but they also managed the whole process which saved us a lot of time and hassle. We couldn’t believe how smoothly everything went and actually found it a lot easier than buying property in the UK.”

 When it comes to advice for others, Calum says that it pays to be brave when negotiating price, but that it’s also important to factor in other costs at the outset. “We had to pay the agent’s fees up-front, which added quite a bit to the initial cost, as this isn’t something you can just add on to the mortgage,” he explains.  “It wasn’t a problem, it’s just something to bear in mind if you’re thinking about buying.”

Clare Nessling is Director of Conti, the overseas mortgage specialist.

Tel: 0800 970 0985

www.mortgagesoverseas.com

 French mortgage best buys available through Conti

 Interest rate  Product type  Max LTV Repayment/Int-only  Minimum loan
2.20% Variable -10 yrs 80% Repayment €100,000
2.60% Variable – 25 yrs 80% Repayment €100,000
 2.70% Fixed – 20 years 80% Repayment  €100,000
 2.85% Capped 85% Repayment  €100,000
 

Rates correct as at 9/11/15. All product specifications will depend on individual circumstances. The table shows a small selection of the deals currently available and should be used as a guide.

 *Source: Halifax House Price Index. Sterling cost based on exchange rates at time of writing

 

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