Controlling Rent and the Written Lease/Observing Paris Prices and Foreign Buyers
French Property Insider Volume XIII, Issue 31 Thursday, July 30, 2015 • Paris, France
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Bonjour French Property Insider Subscriber,
Rent control is here. And the city is going to make it easy to calculate.
The Prefect of the Ile-de-France region, Jean-François Carenco, signed the implementation of the rent control system in Paris on June 26th to begin on August 1st, in application of the ALUR law and of the decree 2015-650 of June 10, 2015.
The calculations are based on rents recorded by the l'Observatoire des Loyers de l’Agglomération Parisienne (OLAP)(Observatory of Rents of the Paris Agglomeration [OLAP]). Each year, it sets a basic rent, plus or minus, based on a price per square meter of living space, according to housing types and geographical areas.
WRITING THE RESIDENTIAL LEASE: AS OF AUGUST 1, 2015
Under the ALUR law, or loi-alur.fr/, a decree of May 29, 2015 (No. 2015-587) specifies that certain information is mandatory to be included in a residential lease for use as primary residence, applicable from August 1, 2015. To simplify the application of this decree, a standard contract is provided.
The decree applies to principal residences, even if shared, for furnished properties. It does not apply to public housing nor does it apply to rental property owned by joint venture companies in Guadeloupe, Martinique, Guyana, Reunion and Mayotte.
The model lease must contain the following information:
* the designation/description of the tenants; * the object of the contract, the description and the list of the rented furnishings; * the date of taking effect and the duration of the lease; * the amount of the monthly rent; * where appropriate, specific initial fixing of the rent amount in some regulated areas (areas of continuous urbanization over 50,000 inhabitants where there is an imbalance between supply and demand of housing, resulting in the serious difficulties of access to housing throughout the residential market); * if the previous tenant left the property less than 18 months before the signing of the lease: - amount of the last rent paid by the previous tenant, date of payment and date of the last revision of the rent; - the fees of the professionals billed to the tenant (bailiff, estate agent, notary); - the amount and description of the work carried out since the departure of the previous tenant.
PARIS PROPERTY PRICES
The Ile-de-France real estate market was a little more dynamic these last months, especially in the Grande Couronne. The tendency to lower selling 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 based on the seasonality of sales.
Sales are up about 6% over the same period a year ago in the Ile-de-France with 32,650 resale dwellings sold from February to April 2015. Activity has returned to a level identical to that of the last ten years. The improvement is most visible in Grande Couronne, where sales increased by 10% when comparing February to April 2014 and the same period in 2015. The progression is virtually identical for apartments (+11%) and houses (+9%). Sales have changed little in Paris (+3%) with approximately 7,000 apartments sold. The month of May 2015 showed a continuation of the trend with a slight increase in sales.
Prices are still decreasing annually of 2% in Ile-de-France, with somewhat more of a decrease on apartments (2.5%) than for homes (0.8%). In three months, the prices of resale dwellings fell by 0.2% and 0.1%, after consideration of seasonal variations. In Paris, the per square meter price amounted to €7,920 in April, down 2.5% over one year and 0.1% in three months. According to advanced indicators from the preliminary contracts of sale, the sale price could stabilize in the capital in the coming months before increasing slightly in July and August (€7,990/m² expected). This very slight acceleration in prices is seasonal (sellers want to be able to dispose of their real estate for the school year period).
Observers have often highlighted the role of foreigners in the influence of prices and on the real estate market. They exercise a key role on certain market segments close in the capital (very large properties of very high quality) or the inner city of Paris and therefore their presence should be put into perspective.
A foreign clientele which includes purchasers whose strategy is very diverse. Paris as a cosmopolitan city, like all major world capitals, has a fairly large foreign population (approximately 15% of the inhabitants of the city). Quite naturally, the foreigners are therefore also present in the real estate market, although in a lesser proportion (approximately 8%), among purchasers of Paris apartments. On the other hand, foreign buyers are profiled very differently. Thus, the statistics distinguish those who are born abroad, reside in France and purchased primarily property in Paris. They have become more active in the capital in a slower, but smoother movement for the last five years. While they represented around 4% of the purchasers between 1996 and 2011, they represented 5.5% in 2014.
The share of foreign buyers fell below 3% compared to when it had progressed until reaching almost 4% in 2008/2009. The very strong rise in the price in 2010 seems to have triggered the decline. Since then, it is observed for the last three years during price declines that encouraged their return on the Parisian market along with the decline of the euro.
The Italians are still very present in the capital and stand out by far as the most represented in Paris of all foreign buyers. The six most represented countries, outside of Italy, cumulatively represent about 5% of the purchases of foreigners in 2014, with variations in periods of time. The Portuguese, Algerians and Chinese were most numerous in the 1990s on. The English and Americans accounted for more than 10% of foreign buyers in the early 2000s. The share of German purchasers is stable at this time.
On average for almost 20 years, the Italians, Americans and English who bought in Paris were mostly non-residents who settle or purchase a property without having lived in the capital. Other nationalities, and especially the Portuguese and Chinese, already mostly reside in France at the time of their purchase.
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