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• January 2012

  French Property Prices set for stable year

  French property prices rose 2% in 2010 and a further 7% in 2011 after drops of approximately 3.5% and 5% in 2008 and 2009 respectively. This means that we essentially back to where we were in 2007 after 10 years of uninterrupted rises. The number of transactions reached record numbers in September 2011 with over 830,000 transactions recorded. This level of transactions was greatly supported by the historically low interest rates and government tax incentives to buy new build property. We will not see such support in 2012 as interest rates are now higher and many incentives have ended. Add to this the stricter criteria in evidence for obtaining credit many anticipate slowdown in the numbers of transaction, with some predicting falls of up to 5% if the economy continues to slow down. Given the extra strong performance in prime locations such as Paris and the PACA region should continue to grow.

  Highlights 2011

  
  

  Apartments across France rose 8.9%

  Houses rose 6.20%

  Paris apartments rose over 22%

• November 2011

  French house price chart by area

• October 2011

  Property market report

  The increase in French property prices was muted in the third quarter of the year increasing by 0.6%* compared with the 4.3% increase experienced across regional areas of France in Q2. In Paris, prices were on the increase again with a rise of 3% in Q3, though the increase in the house prices was just 0.2%. Looking at France as a whole we saw an increase of 1% during the last three months which gives an increase of 7% for the year since Q3 2010. This constitutes +8.5% for apartments and 5.5% for houses.

  The main reasons for the slowdown are the increases in rates earlier in the year which have fed through into the market and helped fuel economic uncertainty. This price stall may well be set to continue as many French people abandon projects for rental investments and second homes after increases in capital gains tax announced last month. Whilst rates have increased, they are still at relatively low levels. The capital gains tax changes are less of a concern to British and international investors as for the majority the overall net position has not changed much.

  Further highlights for investors include some very strong growth in prices over the past 12 months; apartments and houses in the Champagne region have seen average rises of 10.5%, a return to growth in the Rhone-Alpes region of 3.5% and an increase of 12.6% in the popular PACA region which includes Provence, the Alps-and the Côte d'Azure. Good news for those seeking mortgages on ski property this winter.

  At the prime and super prime end of the market the total sales were estimated at €131million for the last quarter, an increase of 67% versus Q2. Whilst the majority of buyers are French, international investors are making up an increasing proportion of the market as many seek secure value assets.

  *Figures obtained from various sources including the FNAIM

• September 2011

  French Capital Gains tax update

  The new law on French capital gains tax is set to come into force for properties sold after 1st of February 2012 after a new version of the law was ratified by the French National Assembly on the 7th of September and adopted by the Senate the following day. The tax will be levied on gains made on second homes or investment property with exception of the main residence.

  Under the previous regime the taxable value of the property was reduced by 10% each year after five years of ownership resulting in no tax due after 15 years of ownership. Under the new rules it will still be possible to have a zero tax bill on the ownership of a second home in France, though now only after 30 years.

  Although the law will not materially affect non resident owners in Briton and Europe owing to dual-taxation arrangements, the tax will be higher on residents of countries without such treaties. It is recommended if you have property in France, that you are thinking of selling, to sign a sales contract in November to have a chance of taking advantage of the old system (you may still be taxed under the new system if you sell your property to a company).

  The details are as follows: First 5 years: no reduction Years 6 to 17: 2% per year Years 18 to 24:4% per year Years 25 to 30: 18% per year.

  It will still be possible to deduct the acquisition costs and any renovation costs though generally this amount will be limited to 15% of the purchase price.

  We may well see a glut of properties onto the market and some bargains around for those able to take advantage of the low interest rates currently on offer.

• August 2011

  New French Capital Gains Tax to encourage speculation

  A new method of calculation of Capital Gains Tax announced by French Prime Minister, Francois Fillon last week, which may well give rise to an increase in transactions and property speculation by both French and non-resident buyers of French property.

  Previously French the CGT rate applied to any capital gains made on French property would have reduced by 10% annually after the fifth year of ownership until there was effectively a zero rate applied in year 15. This 10% reduction after year five has now been scrapped in favor of an alternative calculation which instead allows sellers of French property to deduct the official amount of inflation during the period of ownership from any capital gain before the flat rate of tax is applied.

  Example of Non French resident from the EU with a 19% rate

  Purchase Price €180,000 in 1999

  Sale Price €260,000 in 2011

  Capital Gain €80,000 after 13 years

  Method before 25th August 2011

  A capital gain of €80,000 reduced by 10% for each year of ownership after year 5 leaves €16,000. The 19% tax rate applied to this gave a CGT bill of €3,040.

  Method after 25th August 2011

  We take the purchase price of €180,000 to which we add the amount of inflation since 1999 of 21% or €37,800 which we add to the purchase price to give €217,800. The difference between the purchase price adjusted for inflation and the sale price is €42,200 to which the 19% CGT rate is applied leave a CGT bill of €8,018.

  Rates for non French resident European will be unchanged at 19%. For those outside the EU the rate is 33.3%, whist for residents of countries without any taxation agreement with France the rate will be 50%. Rates for French residents will rise from 31.3% to 32.5%.

  The main beneficiaries of this new calculation will be those who seek to sell within the first five years of ownership. Under the previous system the full rate of tax applied on the capital gain, whereas under the new system, sellers can offset the amount of inflation from the calculation of their capital gain.

  This change will be ratified on the 6th of September and should lead to an increase in shorter term holding of French property and renovation of French property as there is now an approximate 10% extra tax free capital gain for those selling under the new regime.

  For the majority of UK buyers in France this tax is a bit of a red herring. The new tax will not affect their overall situation as any tax paid in France will be offset against tax paid in the UK. A larger effect will be found by those fiscally based in France or in low tax jurisdictions without dual taxation agreements with France.

• July 2011

  A look back to 2010

  French house prices increased by 141% from 1998 to 2010 according to the French National Institute of Statistics and Economic Studies. And 2010 saw the return to positive growth for the French property market after a rocky 2009.

  The number of transactions by foreign buyers in France amounted to over 50,000 in 2010 versus almost 40,000 in 2009 – an increase of over 20%, which was also seen in the market for French property sold to French nationals. The average loan amount was up 10% to €210,000 based on an average transaction amount up 6% to €238,000, with approximately 30% of buyers taking a mortgage. The most popular areas were Paris with 35%, Province/Cote d'Azur with 13%, Rhône-Alps with 11% and the Languedoc Roussillon with 5%.

  British buyers represented 11% of the market overall with close to 6,000 recorded transactions in 2010. The Brits are the number one overseas buyers in the Languedoc Roussillon, followed Aquitaine, Midi Pyrenees, then Normandy, Brittany, Poitou Charente and the Limousin. In terms of numbers of transactions, the highest level for British buyers could be found in Province/ Cote d'Azure, after the Italians. In Paris the numbers of recorded transactions by British buyers was limited to approximately 400.

  Overall the profile of those buying in France has changed over the last few years and affluent buyers are now starting to come from emerging market economies. The sector has seen large increases in the numbers of Russian and Chinese buyers.

• June 2011

  Tips for beating rate rises and changing bank criteria

  My top 5 tips for dealing with a dynamic rate and bank attitude environment such as this is to:

  - Begin investigating mortgage options as early as possible in the buying process and get a decision in principle from a broker.
  - Ensure you qualify for life assurance and find out if you will require a medical exam.
  - Ensure all paperwork for the loan application is as complete as possible prior to signing a Compromise de Vente.
  - Once you are ready to purchase send the completed file to an independent broker who is aware of the criteria and can place the application quickly with the right bank to match your profile.
  - Sign and return all documents as quickly as possible to keep the momentum going as the longer the file is in process, the more likely criteria can change or rates increase.

• May 2011

  Tips for beating rate rises and changing bank criteria.

  Helen, 47, an accountant from Kent, recently wrote to us having had a bad experience approaching a bank directly.

  " The main reason for not going with that bank is our previous experience with them and also the experience of a friend of mine here in France. We both feel they ask more questions and require more information then is reasonable, they take a long time to reach a decision and then change the goal posts between offering a decision in principle and making the final offer"

  Sadly this experience is not uncommon but it is where we can help. My top 5 tips for dealing with a dynamic rate and bank attitude environment such as this is to:

  - Begin investigating mortgage options as early as possible in the buying process and get a decision in principle from a broker.
  - Ensure you qualify for life assurance and find out if you will require a medical exam.
  - Ensure all paperwork for the loan application is as complete as possible prior to signing a Compromise de vente.
  - Once you are ready to purchase send the completed file to an independent broker who is aware of the criteria and can place the application quickly with the right bank to match your profile.
  - Sign and return all documents as quickly as possible to keep the momentum going as the longer the file is in process, the more likely criteria can change or rates increase.

• April 2011

  Prices still on the upward climb... but for how long?

  French property prices rose by more than 10% overall over the last year, with property price rises in Paris almost double that figure. According to a large estate agency in France, apartment prices increased by 0.25% in March – the fifth consecutive monthly increase – while house prices rose for the 17th month in a row, up almost 1% in the same period. The same agency also notes that the average difference between the published price and the actual sale price is approximately 5%, based on figures from more than 12,000 sales in March.

  We will watch with interest for indications of how the market reacts to interest rate rises, as each increase reduces the amount of money that individuals can borrow. Added to the increase in rates is a rising trend for extra underwriting scrutiny by many lenders. Whereas in the past a single underwriter could give a decision on a file, now many banks are employing extra credit committees to double check each file using more stringent sets of underwriting criteria.

  The challenge for us at Athena Mortgages is to stay up to date with and adapt to the evolving criteria we face from each of the top 50 lending institutions we can work with across France. Fortunately we have longstanding relationships with these institutions, which means we have the communication procedures in place to maintain good customer service. We are happy to try to help those who have been refused and also those who are applying direct as we are confident we can beat almost any rate – especially if the borrower has a 30% deposit

• March 2011

  Market review for UK buyers in France

  Mortgage lending through UK lenders has dried up across the board over the past 12-24 months. This has inevitably had an impact on the ease with which British buyers can secure finance through UK banks to purchase property in France. The days when homeowners released equity from their properties to pay for that dream holiday home in Provence are now a distant memory.

  A combination of falling house prices in the UK eroding the equity that homeowners have in their properties and the UK mortgage market drying up and leaving homeowners with very few remortgage options, has seen an increasing number of British buyers turning to a French mortgage as a means of financing a property purchase in France. Also, with the Pound currently weak against the Euro, buyers can take currency fluctuations out of the equation, and potentially save thousands of pounds on the purchase, by taking out a French mortgage and holding onto the property until Sterling rallies.

  For those UK buyers who have 15-20% deposits, French mortgages are proving particularly popular as they can take advantage of some of the lowest mortgage rates in French history. Although historically French lenders have had much more stringent lending criteria thanUK banks, for those borrowers who can meet these criteria, there are some exceptionally attractive fixed and variable rates on the market. It is even possible to secure 100% mortgages if the borrower has savings that amount to 30% or more of the amount they want to borrow.

  It's worth noting that borrowers will have to prove they can afford the repayments on the mortgage. French mortgages work on the basis that the total of all mortgages and loans held by the borrower do not exceed one-third of their income, which means that monthly repayments on a UK mortgage will be taken into consideration when trying to fund a property purchase in France.

• February 2011

  New build bounces back, opportunities for UK investors

  In 2007 more than 125,000 new build units were sold in France marking the high point in property sales for that property class. The numbers almost halved the following year to 79,000. However recent figures suggest that the crisis in the sector may be over with just over 115,000 units sold in 2010.The future for the sector looks bright with many new developments coming online since the beginning of the year which will encourage many overseas and British investors looking to buy new build property in France.

  British buyers have been in competition with French buyers who have had additional tax breaks offered by Sarkozy which has led to a scarcity of new build units in the Alps, Paris and other prime locations. Under the Loi Scellier, French tax payers can offset 25% of the property value against their income tax liability which has encouraged many high rate tax payers to buy. However, the amount which can be offset will be reduced to 20% for 2011 which should allow overseas investors more choice.

  The ultra low interest rates combined with excellent tax breaks has created a buying frenzy in France which has meant that many investors from Britain had been missing out on the prime units, preferring to wait until something more suitable comes along. At times our clients have found there to be a lack of choice in some developments as French buyers have been snapping up the best available units immediately. However, this has changed since the beginning of the year according to many of our partners selling new build property. Large leaseback developers are reporting an increase of stock and choice not seen at the end of last year which in turn is leading to an increase in sales to British and overseas buyers who can now find the property they want.

• January 2011

  French property prices on the up

  Prices for existing French property fell 3.1% in 2008 and 4.9% in 2009 but began to climb again in 2010, rising by 1.5%. If you compare the lowest point for French property prices in recent times, prices have increased 5.3% from the first quarter of 2009 to the end of 2010. To look at things another way, you could say that prices have remained flat for the past five years, making it an interesting time to find a bargain. One place where prices certainly have not remained flat is Paris, where prices rose by an average 4.4% over the same period.

  The low interest rate environment has contributed to the recovery of French property prices, to a large extent reducing payments on existing mortgages and increasing the purchase power of borrowers as the cost of borrowing has come down. Transaction numbers increased 25% in 2010, rising to over 700,000 – just 100,000 below the peaks seen during the previous decade. Despite the recent increases in rates, the National Federation of French Es tate Agents (FNAIM) predicts growth in 2011 of between 3% and 6%, the higher figure based on interest rates not rising more than 1.5%. If interest rates did rise further than that we would see increases on the lower side. These predictions are for the whole of France so of course there will be regional variations. Average falls in the prices of apartments of more than 6% were registered in the medieval town of Troyes, a good performer in recent years, and also in Perpignan and Pau. Many areas on the Cote d'Azur saw rises of over 6% in the values of apartments for the year including Cannes and St Raphael, with Lyon and Marseille increasing by 5% and 4.5% respectively. Average increases in the prices of houses of between 3% and 9% we recorded in the Pas de Calais, Île de France (Paris) and PACA (Provence-Alpes-Côte d'Azur), making these regions the top three for 2010.

  Source: FNAIM

• November 2010

  News round up

  Paris property prices up 10.6%
  Prices for Parisian 'pieds-a-terre' are strongly up on the same period last year according to a recent study. The average property price has for the first time broken the €7000 per square meter barrier. Transaction numbers are now at the average levels seen during the boom years of 1999 to 2007, having risen 23% since Q3 2009.

  Hips for France?
  A new law will come into force on Jan 1 2011 making it a requirement for all vendors to produce an energy "DPE" report on their property before putting the property on the market. This will mean a reduction in stock at the beginning of the year which should underpin current pricing levels overall but also act as a tool for negotiation for price reductions on older properties.

• October 2010

  Transaction numbers increasing

  Recent figures show that the transaction numbers are increasing in France, providing a knock-on effect on French house prices. The number of transactions annually stood at around 800,000 or more for the five years preceding 2007, before sales numbers across France began to fall. The main reason for these falls was a combination of very high interest rates and inflation just prior to the financial crisis and the collapse of confidence thereafter. This continued until the middle of 2009, when annual transaction numbers stood at just over 550,000. It is no surprise that as mortgage finance became more affordable, and the end of the world didn't materialise, people were drawn back to the market, especially as in some cases buying was cheaper than renting. Since mid-2009, the number of completed house purchases in France has risen by around 100,000 per year. The figure now stands at just under 650,000 with the v-shaped recovery continuing. House prices have followed more or less exactly the same trend, with mid-2009 seeing prices start to rise again, and this upward trend has continued. While transaction levels remain below their peak, bargains and discounts will still be possible to find but these will become rarer as the market picks up again.

  Click on this presentation to find graphs illustrating these figures.

• September 2010

  La Rentrée-Property market open for business

  September marks the point at which France wakes up again after the annual slow down for their renowned annual vacations. France has been gearing up throughout September and we are now seeing a large increase in the number of completed transactions. The market for French property is certainly back in action with the number of leads received by Athenamortgages.com up 33% on last month.

  The extent to which France is effectively shut for business during this time is not to be underestimated. One Notary we spoke to in the early summer effectively told us he would not be available for the next six weeks. This pattern is mirrored across France with many other government departs unreachable. At Athenamortgages.com, we always warn clients that getting mortgage offers in the summer months may take longer than expected as some banks are generally understaffed and unable to cope. With the French now fully rested and recuperated you can now expect your purchase in France to go through smoothly.

• August 2010

  If tracker mortgages were the flavour of last month then fixed rates will be all the rage in September. Rates for fixed rate French mortgages have fallen significantly in the past year but the recent dramatic drop in the TEC 10 index (explained below) indicates that we should have the lowest fixed rates ever to be offered in France next month. The last time average fixed rates in France were below 3.50% was back in Q4 2005 when the TEC 10 was above 3%. With the TEC 10 now as low as 2.60%, a fall of around 40% in August alone, this could herald fixed rates at levels unseen in decades.

  In an environment where French property prices are now stable but with sellers likely to be tempted by fair offers, now really does seem like a unique opportunity to buy a French property, especially with the security that a fixed rate mortgage brings.

• July 2010

  New boost for luxury property market?

  Last year France signed tax exchange of information agreements with a number of jurisdictions including Jersy, Guernsy the BVI and Cayman Islands. The draft French laws to bring them into effect have been passed by both houses of the French parliament and are now in force and will have effect for the purposes of France's 3% tax as of 1 January 2011.

  Until now offshore trusts and companies based in the above tax havens had to pay a punitive 3% per annum on the gross market value of the properties which meant few such entities invested in France. This is now set to change as provided disclosure is made of the shareholders in such entities, no 3% tax will be levied.

  According to French tax specialist David Anderson, "Investors are likely to seek asset classes not open to them in the UK such as ski chalets,vineyards and chateaux. The areas which are usually most attractive to foreign investors are the Cote d'Azur, Alps and Paris.

• June 2010

  104% mortgages on leasebacks?

  This month discussions with our partner banks has shown up a new trend when it comes to financing French leaseback property. Some of our partners are now looking to create a list of leaseback builders and management companies that are considered to be the most secure. For these companies new loan conditions will be in place which will in fact see loan to values increasing to in some cases cover 100% of the purchase price of the property excluding VAT and 100% of the legal fees and taxes

  This will be fantastic news for overseas investors looking to secure prime leaseback property from major developers.

• May 2010

  French property prices in the first quarter of 2010 appear to have risen significantly compared to the same quarter in 2009. The figure, estimated at 7% by the Fédération des promoteurs constructeurs (Federation of house builders) saw increases in the prices for new build property at 3.6% in Lyon, 8% in Paris, Ile-de-France and an impressive 11% in the city of Marseille. The average price for a one bedroom apartment stands at €168,858 and a 4 bedroom house at €512,412. Overall, compared with the first quarter of 2009, sales of new homes have increase by 18%, with the numbers of sales doubling in the urban areas of Paris, Lille, Toulouse and Lyon.

  It is always important to check which Euribor rate as well as the margin added to your loan and to compare like for like as a loan with a lower margin might be based on the much higher 12 month Euribor.

  The FNAIM (Federation of French Estate agents) also published is quarterly report in May painting a slightly different picture, though it does take into account the whole of the market, not just new build prices. The figures published this month show an overall drop in average French prices of 2% since the same period last year, 1.9% for apartments and 2.2% for houses. The Paris property market has returned to growth with a yearly increase on average of 2%, which mirrors the growth seen for the whole of France with an increase of 1.8% since last quarterly result were published.