French Property Market Guide

France

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Summary: EU member. Double taxation with Ireland. Cheap financing available. Owner occupancy levels of 57%. Annual appreciation of 7-10%. Gross rental yields of 4-6%. 10 year price increases approx. 100%

 

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France property market:

France remains one of the favourite locations for the Irish for holiday and also investment locations. Over the last decade the prices of properties have continued to rise, however, in recent times have slowed down. A major interest to Irish investors is the French Leaseback type of investment which will be explained later on.

Owner occupancy levels is average at approximately 56% which would indicate that there would be a reasonable rental market on a domestic level and would not primarily be holiday lets.

A French property investment offers a lower risk investment as France is a very well established economy. Property owners may purchase property freely and on a freehold basis, property rights are well protected and restrictions do not apply. France also offers foreign buyers cheap financing options with interest rates starting at 3.65%.

Major cities like Paris would be very expensive and would be on par with most major cities with average property prices per square metre being over the €6500 per square metre market. According to a report released by Knight Frank property values in France increased by approximately 9.4%. Data collected from FNAIM would indicate slightly lower levels of property price inflation.

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Old residences Growth rates December 2006

Term

Houses

Apartments

 

Growth rates Apartments 2003-2006

2003

2004

2005

2006

 

Growth Rates Houses 2003-2007

2003

2004

2005

2006

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(Source of property price increases: www.fnaim.fr)

 

Property price history, comparison with EU

What is a French Leaseback?

The French leaseback has been in practice for a while in France, however it is only recently that it has caught on with the Irish market. It is a scheme by the government to create higher quality tourist accommodation with the idea of creating higher revenues from the tourism market. A French leaseback is an opportunity for investors and holiday home buyers to purchase a property on a freehold basis which in turn is rented out for a guaranteed return of approximately 4-7% for a period of 9 years. What makes the French leaseback even more attractive is that owners may use the property for a few weeks which will normally be pre-determined at the beginning of the year. A major benefit of the French leaseback property is the VAT refund of 19.6% of the property value.

Many leaseback schemes require an initial deposit of 20% as a down payment and most buyers would then arrange for a mortgage of 80%. The VAT refund can then be used to reduce the mortgage amount substantially and thereby insuring that the rental income covers the mortgage repayment.

French leaseback properties also have the added benefit that they comes fully furnished and are maintained during the rental period. There are leaseback schemes that are also designed for pure investment and do not offer the added benefit of own usage. These types of leasebacks will be based in the major cities like Paris and will guarantee a higher guaranteed return of 6-7%.

If you would like more detailed information or have a specific question about French leaseback properties please use the Myoverseasproperty.ie ‘ASK AN EXPERT’ service which is located on the homepage.

France rental market:

Typical rental contracts vary in the terms of 1-3 years, however, if it is a leaseback arrangement this period can be much longer. The term of the contract will also be determined by whether the property is fully furnished or not. A furnished property generally would have a term of approximately 12 months whereas an unfurnished property typically would have a term of 3 years. It is important to note that French tenancy laws are very strongly pro-tenant and many constraints exist in relation to increasing rents. Please refer to the Myoverseasproperty.ie legal pages.

 

French property can be rented out on a short term basis to the domestic holiday market or foreign market. The location in tourist locations is extremely imported and the closer the proximity to the attractions and amenities the higher the rent chargeable. As in all markets the size and the finish also affects the rental income to a certain extent. 2 bedroom apartments in the South of France in the upper end of the tourism market can be rented out for as a high as €1200 per week during the months of July and August. After this period the rental incomes can drop substantially to around €500-€600 in April and October. This type of property will cost approximately €200,000. The season in France is late June to the end of September, early October, and lasts for around 12 weeks. Typical rental and management costs vary, but generally are 20%-25% of the gross rental income.