Flirting with France
Living the life of the French – good food and great wine in breathtaking surroundings – is tempting. But is their property market holding up? Rosanne Barrett takes a look
When Peter Mayle described his year spent bathed in sunshine, amid romantically crumbling chateaux in the 1989 autobiographical novel A Year in Provence, he echoed the dreams of many wage slaves around the world. Eating local food and consuming the local wine, he explained the allure of the French life. He starts: “The year began with lunch” and goes on to describe his 12-month adventure. “It was hard to associate the sunshine and dense blue sky outside with the first of January but, as everyone kept telling us, it was quite normal. After all, we were in Provence.”
France has been hit severely by the worldwide recession but there are glimmers of hope for the property market. House prices in the second quarter were up slightly and late-August figures suggested the world’s fifth biggest economy was inching out of recession. With property prices at a low not seen since the end of 2004, is now the time to make a dream come true and create a new life for yourself in France?
England-based real estate agent Trevor Leggett, from Leggett Immobilier, says there are plenty of bargains on the market. He says “prize buys” are available in France, especially in Paris, where prices have fallen considerably. He says in France the average property takes one year to sell but despite the sluggish market activity, he urges caution when considering bargaining on properties in great locations.
“You must take into account that properties recently added in the last few months have been valued at present market rates — not those of 2007, so asking vendors to reduce prices by a further 20 percent to 30 percent is unreasonable and unlikely to culminate in a purchase,” Leggett says. “There are some great deals out there, even at the full asking price on recently added properties.”
The French real estate agents’ governing body FNAIM reported that house prices rose by 3.6 percent in the second quarter of this year. But this optimistic headline was disputed by some because in the figures, prices peaked in April and fell again in May and June. The release of these figures caused some controversy in France and reportedly led to the resignation of a FNAIM executive, who said the April figure was not statistically significant. In the accompanying report, the organisation described the market as remaining in “deep crisis”, even predicting that prices may reduce further. The main concern cited was the fall in market activity – more than 30 percent in the last 12 months.
“Even if recent economic data seems to confirm a tremor of activity, the spectre of a deeper structural crisis cannot be rejected,” the report said. FNAIM even suggested further falls could be a good thing, as they could tempt bargain-hunters back into the property market.
In response to the downturn, France’s government has attempted to stimulate the property market with a range of initiatives including interest-rate reductions and tax incentives. One that has reportedly been successful is the loi Scellier that offers tax breaks to would-be landlords. An income tax break of up to 37 percent on the purchase cost of a rental property isavailable for French taxpayers. This benefit can be enjoyed for up to nine years but only by property owners in specific areas.
Properties and prices vary greatly across the wide country of France. From the chic cities to the mountainous regions and the vineyards to the Mediterranean coast, there are holiday homes to suit every taste. According to figures from FNAIM, the average square-metre price to mid-2009 for an apartment in the Ile De France region, which includes Paris, was €3,935 (HK$43,453). For a house in the same region, it is €2,801. Both these average prices have fallen considerably since 2008: a drop of 5.9 percent for apartments and 10.4 percent for houses.
One Parisian apartment currently listed for sale on the www.frenchproperty.com website is a new, two-bedroom, 68-square-metre apartment in the 19th arrondissement (district); the owners are asking €376,000 through Sextant Properties. It is close to the Parc des Buttes Chaumont (Chaumont Hills Park) and metro transport. For something in the heart of Paris with a view of the Eiffel Tower, Madison Real Estate is featuring a two-bedroom, 77-square-metre unit with a balcony. The building is in the Art Deco style from the 1930s and faces east/west. It is listed for €830,000.
Prices in the popular Provence-Cote D’Azure region have also fallen more than the national average. Apartment prices per square metre are now €3,345, a drop of 12.4 percent, while house prices are €3,024 per square metre, a fall of 14.2 percent. Should you be looking to replicate Mayle’s experience and would like to renovate a traditional farmhouse, Cabinet Grignan Investissements is offering a four-bedroom house just outside the Village de Caractère Montsalier. Sitting in an elevated position overlooking lavender fields and woodlands, the 100-square-metre house is listed for €315,000.
But think twice before buying a property to rent out for most of the year. Tenancy laws in France are strongly pro-tenant and rents, once set, must not change for one year. Owners must include a clause that they may increase the rent after one year in the initial contract, otherwise they must prove by giving nine local examples, that the property is undervalued. Unfurnished properties are generally let for three years and one-year agreements are only allowable if the owner can prove he will require the property for “professional or family reasons”. Overseas investors generally pay tax on their French rental income.
Overall, the French property market remains in a slump. Despite significant falls in prices, bargain-hunters are yet to make an overall impact on the market – though this may be changing. As long as the euro remains strong and the French economy sluggish, perhaps your dream of owning a French holiday home may have to wait for another year. C’est la vie.
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