As featured in the March/April 2015 edition of Your Mortgage magazine
La belle France
With sterling appreciating against the euro, now is the time to bag a French bargain, says Clare Nessling
Simple but sophisticated, proudly traditional yet undeniably contemporary, tranquil and bustling, France is a country of contrasts that has something for everyone. With its breathtaking mountains, sunlit vineyards, miles of sun-baked beaches, sleepy villages and vibrant cities, it’s easy to see why it’s the most visited country in the world, according to figures from the United Nations World Tourism Organisation.
The diverse landscape and distinctiveness of its 22 regions characterised by their unique style and customs, combined with an equally varied climate, create an alluring mix. Altogether they make France one of the most popular countries for a home abroad. The country, in fact, accounts for around a third of the enquiries we receive from people looking to buy overseas property.
More maison for your money
When you compare the cost of a home abroad with overheated parts of the UK market, there are plenty of buyers who are willing to explore overseas opportunities in their search for better investment potential. And France is no exception. Bargain prices and historically low mortgage rates are making it more affordable than ever to snap up a property across the Channel, but the biggest boost to buyers’ budgets has been the steadily increasing value of the pound against the euro, which is effectively shedding tens of thousands of pounds off prices.
With the pound hovering around a seven-year high of €1.31 at the time of writing, compared with €1.14 back in the summer of 2013, it effectively means that the price of a €200,000 home in France has fallen from around £175,000 to under £153,000. Buyers, full of fresh optimism, are coming back. And with Goldman Sachs predicting that sterling will continue to climb against the euro over the next three years, buying power could become even stronger.
Prices, in general, are more affordable than in the UK, with plenty to choose from within a budget. According to Notaires de France, the national average house price in France is €159,000 compared with £189,000 (or €246,656) in the UK*. Like anywhere else, however, there are wide regional variations, with average prices ranging from €105,000 in Limousin to €290,000 in Provence-Alpes-Côte d’Azur.
There are mixed reports about French property prices, but according to data published by the statistical office of the European Union, Eurostat, they fell by 1.1per cent between April and June 2014, compared with the same period in 2013. In contrast, UK prices grew by an average of 10.2 per cent over the same period. And according FNAIM, the national association of French estate agents, prices fell by an average of 1.5 per cent over the whole year, leaving them (on average) at the levels they were in 2007. A slower property market has been pushing French prices down over recent years, and under recent market conditions, people have been keener to sell and therefore more likely to be receptive to offers lower than the asking price.
French mortgage rates are still at their lowest in decades and at the time of writing, deals start at just 2.2 per cent for a variable mortgage over 10 years, and 3.25 per cent for a 25-year fixed-rate mortgage. And unlike many countries where the best rates are limited to those with the biggest deposits, both of these deals, and many others, are available for mortgages of up to 80 per cent loan-to-value.
Securing finance these days isn’t quite as straightforward as it once was but French lenders are still willing to lend to UK buyers, especially if they can prove that they have a sound financial profile. They’ll require more details about income and outgoings, so it’s important to have your accounts in good order.
We always recommend that buyers obtain an ‘approval in principle’ before committing to a property purchase. This costs nothing, but will tell you up front about how much you can borrow, and therefore what price range you can realistically consider. It will also prove to vendors that you’re serious about buying.
It’s preferable for an overseas mortgage and the income used to service the mortgage repayments to be in the same currency, thus avoiding exchange rate issues, and this can work very well if you intend to rent your property out and receive the income in euros. And if you have plans to pay off your mortgage early, you should check what the redemption penalties are on any mortgage deals on offer, particularly fixed-rate ones.
France pretty much ticks all the boxes for overseas investment – affordable property, low mortgage rates, easy access from the UK, a familiar culture and good rental yields to name a few. With a defiantly dynamic property market, it also represents relative stability amid the recent economic downturn.
As always, however, it’s imperative to do your homework and to take professional advice before committing to anything, and you should always go through the same process that you would follow if you were buying a property in the UK. Don’t be tempted to cut corners.
Case study – ‘Easier than buying in the UK’
Amanda Turner, aged 48, and her husband Philip, aged 47, from Surrey, are about to complete the purchase of a second property in La Garde-Freinet, a medieval mountain village in the Côte d’Azur.
They discovered the location several years ago and spent many holidays there with their two children. Five years ago, they fulfilled their dream of buying a home in this stunning location – a split-level bungalow which they converted into a four-bedroom villa with a pool.
“The property had been on the market for more than three years and was in need of extensive work, so we managed to get it for less than half of the original asking price,” says Amanda. “We spend as much time there as we possibly can, including most school holidays and as it’s near Nice and Marseille, it’s within very good distance of local airports so it’s also possible to come here for some weekends when we can manage it.”
The couple have become very familiar with the local property market, so when the opportunity arose to buy another renovation project in the same village, they didn’t think twice. “We’re buying a three-bedroom property which also requires extensive renovation, but as we have some experience behind us now, as well as access to the local team who helped us first time around, we feel very confident about it and are very excited. It’s purely for investment purposes this time and we aim to sell the property once the work is completed.”
The original asking price for the property was €220,000 but the couple negotiated this down to €180,000. On both occasions, they arranged their mortgage through Conti, and this time have opted for a variable rate deal on a repayment basis, having put down a 15 per cent deposit.
“I would definitely recommend using a specialist broker,” says Amanda. “Not only were they able to source the best possible deal for us, but they took the pressure off the whole situation from start to finish and saved us a lot of time, cost and hassle. In fact, on both occasions, we found the process easier than buying property in the UK.”
Clare Nessling is Director of Conti, the overseas mortgage specialist.
Tel: 0800 970 0985
French mortgage best buys available through Conti
Rates correct as at 19/1/15. 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: Nationwide Building Society. Sterling cost based on exchange rates at time of writing