Prices Down, Sales Up; Legalizing Property for Short-Term Rental
French Property Insider Volume XIII, Issue 27 Thursday, July 2, 2015 • Paris, France
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PARIS PROPERTY MARKET -- PRICES EROSION CONTINUES BUT SALES VOLUMES ARE UP (Translation by Bing with Edits)
The Ile-de-France real estate market has been a little more aggressive these last months, especially in the Grande Couronne, according to the latest data from the Notaires de Paris e-de-France.
The downward trend of sales prices, which overall continues at the same pace, could promptly and as in other years, be stopped in the coming months in the Ile-de-France region under the effect of seasonality of sales.
The stirrings observed by the market players begin to materialize in the figures. 32,650 resale dwellings were sold in Ile-de-France from February to April 2015, or an increase of 6% over the same period a year ago. Activity has found a level identical to that of the last 10 years (32,200 sales average from February to April over this period).
The improvement is most visible in the Grande Couronne, whose sales increased by 10% when comparing February to April 2014 and the same period in 2015 (+11% for apartments and + 9% for houses). The developments are also positive in the Hauts-de-Seine and Val-de-Marne. The Seine-Saint-Denis instead shows sales as down for houses as well as apartments.
Sales have changed little in Paris (+3%) with approximately 7,000 apartments sold. The month of May 2015 was subscribed in continuity, with the continuation of a slight increase in sales.
At the end of April 2015, prices were always in an annual decline of 2% in Ile-de-France, with a somewhat lessening for apartments (2.5% and priced at €5,250/m² on the average) than for homes (0.8%, with a unit price at €288,900).
In three months, the prices of resale dwellings fell by 0.2% and 0.1%, after correction for seasonal variations.
In Paris, the per square price amounted to €7,920 in April 2015, down 2.5% over one year and 0.1% in three months.
The slight fall in prices could be interrupted in the coming months. According to indicators developed by the Notaires de Paris Ile-de-France, from the pre-sale contracts, the sale price could stabilize in the capital in the coming months before increasing slightly in July and August 2015 (€7,990/m² expected).
This very slight acceleration in prices is part of the seasonality: generally households wish to dispose of their property for the back-to-school period.
This situation is quite general in Ile-de-France and more acute for homes. It is not representative of a trend in the average term.
HOW TO FIND AND LEGALIZE A PROPERTY FOR SHORT-TERM RENTAL UNDER THE CURRENT REGULATIONS
We've been scouring the market for properties with commercial usage designation which can be converted to legal short-term rental properties.
One such property we found on behalf of a client opened up a Pandora's Box of questions in order to be as close to 100% positive it would pass the test for the city's housing department and satisfy the regulations.
The property is a ground level space situated on a courtyard in the 4th arrondissement very near the Centre Pompidou. It has high ceilings and one solid wall of glass windows, atelier style. The usage is clearly noted as "commercial" and across the courtyard is another property of the same type. A "Marchand de Bien" (property developer) renovated this one for residential purposes and placed it on the market in brand-spanking-new condition.
Our client does not wish to take any risks. We consulted with our property attorney, Anne Bourgeonneau, to eliminate any and all question regarding the property's legal status. She remarked that the law doesn't ever really change, but regulations are layered on top of regulations making it difficult for anyone to decipher, therefore the interpretation of the law is key.
In her conclusion:
A property must satisfy three elements to make it 100% secure in the eyes of the law for a property to be rented LESS THAN ONE YEAR. Take note that anything less than one year, or nine months for student housing, is considered "short-term." Leases of one year or more are absolutely legal for any furnished property.
1. The usage must be commercial. If it already has this designation, then there is nothing to be done different. If it had commercial usage designation on January 1, 1970, then regardless of other uses it has had since then, the property can be considered commercial. (This is not difficult to learn by reviewing the "fiche de révision foncière de 1970".) If not, then one must apply with the city and the home owner's association to have the usage changed. It is easier to get the permission to change from commercial to residential than from residential to commercial.
2. It must satisfy the Regles d'Urbanisme. To further change the atelier to an "hébergement hôtelier" or "habitation," one must submit a "déclaration préalable." In the case of this apartment, newly renovated, it is highly unlikely to be declined permission. The reason for this is fiscal so that taxes are assessed and paid. The Notaires or a property attorney such as Anne Bourgeonneau can provide this work to apply for the change, and the Notaire can request it as a contingency on the sale of the property.
3. The building by-laws or "reglements de copropriété" must agree with short-term rentals. In this case, they do.
Our advice to our client: buy the property with the contingency to acquire the permission for "hébergement hôtelier."
In mid May of this year, the city's team of inspectors patrolled 98 buildings and found 101 violations in three days. They entered property, took photos and videos, calling it a "blitz." They are serious about their quest to put more full-time housing on the market, even if violating property owners' rights.
As all of you readers know, I am not in argument about the housing shortage or the need to recuperate lost properties, but I am completely against the city's methodology which is deemed unconstitutional and a violation of our rights as property owners.
P.S. For those of you in the New York City area, who would like to know more about investing in France, I will be available for private consultations on July 8th and 9th. Consultations are typically two hours, and I will be offering my usual euro fee at the same rate, but in U.S. dollars. Email me personally to make your appointment: email@example.com
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