Twenty to Thirty Minutes
Yesterday I trained back to Nice with Interior Designer Martine di Matteo and her favored architect, Nicole Champagnol, to work on four projects: two of our clients buying substantial properties in the Carré d’Or district of Nice and two of my Fractional Ownership properties—one also in the Carré d’Or and the other in Villefranche-sur-Mer. All four will undergo complete renovations and for that reason, we needed our experts to do their preliminary studies in order to make their design and architectural recommendations.
I like any excuse to go to Nice, even though the weather is predicted to be cold and rainy. “Tant pis” (too bad). We will survive it and therefore not be seduced by the sun and surf luring us away from these important tasks. While Martine and Nicole take measurements and discuss all the possible floor plans, I will be working on a new project to produce a 20 to 30-minute recorded presentation for International Living’s “Best of Europe Private Screening Online, May 22-23, 2021.”
This is a very short amount of time to try to provide an overview of the real estate market in France, explain the advantages (and disadvantages) of investing in France, promoting a few properties on the market, touch on the visa process to become resident in France, explain the possibility of getting a mortgage and even the purchase process. In fact, what I just described here is going to be the focus of a full day conference we are holding in Nice this coming September (soon to be announced with full pricing). So, how can I condense a day’s worth of information into 20 to 30 minutes? Good question!
Today’s Nouvellettre® will be an outline of the presentation as a way of helping me work through the task. This is also your opportunity to provide feedback and let me know what you would like to see that might not be addressed here.
Let’s start with the overview of the real estate market in France. I have to research this just like anyone else since our segment of the market is highly specific and doesn’t reflect the global viewpoint.
According to the Global Propert Guide from a June 2020 article, “France’s housing market remains resilient”:
Although due to Covid-19 the economy is now in recession, France’s housing market continues resilient. In Metropolitan France, house prices rose by a robust 5% during the year to Q1 2020 (3.75% inflation-adjusted), an improvement from the previous year’s growth of 2.95% and the market’s strongest performance since Q3 2011, according to the National Institute for Statistical and Economic Studies (INSEE). Quarter-on-quarter, house prices increased 1.16% in Q1 2020 (1.25% inflation-adjusted).
Meanwhile the French economy, the eurozone’s second largest, has fallen into recession after contracting by a revised 5.3% in the first quarter of 2020, following a 0.1% decline in Q4 2019, reflecting the heavy economic fallout of the strict anti-coronavirus lockdown which lasted for nearly two months. It was the biggest contraction since Q2 1968 when the country was dealing with civil unrest.
Continue reading for a very in-depth look at the French real estate market, but I’d like to draw your attention to one part of the article, “The impact of the LoiDuflot rent control law.” This is something I have written about often, as it irks me that city and state officials tend to make rash decisions without fully studying the facts—rent control having been one of them:
Capped long-term rentals. Rents should not be higher than 20% above the median rent set by the Prefect in the urban areas. This new rent control, imposed on 28 cities with more than 500,000 inhabitants, affects areas with high demand for rental properties, such as Paris.
The Global Property Guide has long been firmly against rent controls, which harm tenants and landlords alike. “It is the surest way to destroy a city without bombing it” noted our former chief economist Prince Cruz in The Pros and Cons of Rent Control. We however approve of rules tending to increase security of tenure, without seeking to control rents, so long as the security is only medium-term.
You’re already getting an idea of how deep and complicated this topic is and why I need a whole lot more time than 20 to 30 minutes. Let’s move on to advantages (and disadvantages) of investing in France…
Of course, one can make a good investment or a bad investment just about anywhere. But, France is a great place to start to make a good one, particularly in proven markets such as Paris where growth has been steady since 1998. House prices kept rising in the past 13 years, not affected by the 2008-2009 financial crisis. Unlike Spain or Dubai, the price increase doesn’t seem to stop regardless of what happens in other areas of the world. The only way seems to be up, up, up…as long as interest rates support the situation (under 2%).
Property prices in Paris are now averaging €10,730/m2, with €14,780/m2 average in the 6th arrondissement. Indeed the increase has not stopped since 1998. A strong increase of +51% in 10 years, and +23% in five years. France’s biggest cities are also all growing, such as Lyon, Bordeaux, Toulouse and Lille. As long as interest rates remain low, the number of transactions will average one million per year and prices should not go down. (Download the PDF chart of prices since 1991)
What are the disadvantages? I can’t think of any. This is a country where property taxes and other carrying costs are very low and enjoyment of your property is a given to be very high…except for the occasional missteps, such as plumbing problems or unpleasant neighbors. Problems such as these can happen anywhere, so France can’t be blamed for that!
And what about good properties on the market to promote? Again, how on earth can this be done in 20 to 30 minutes? As you may already know, we have very few listings. Read more about this from last week’s Nouvellettre®.
But we can find just about anything, as long as it exists (we can’t invent it). Just keep in mind that Paris is the country’s most expensive market. Nice is about half the price of Paris and most of the rest of the country (with some exceptions) is even less expensive. Apartment prices are measured by per square meter rates, while homes can command just about any price and are more difficult to compare because there are so many variables to consider. The question is: what is it worth to you?
You don’t need a visa to make a property purchase in France, but you do need one if you would like to stay more than 90 days. The French consulate is not taking applications at this time except for those attending school in France, but it should open soon given upcoming deconfinement and the ability for travelers to enter France. A visa isn’t complicated to obtain—you just have to comply with a few simple requirements and before you know it, you can legally be in France with a renewable “Carte de Séjour.”
Financing is a big issue for most buyers. It is not easy, but possible to obtain a mortgage in France—highly desirable because of the low interest rates. Most banks don’t want to lend to American buyers (thanks to FATCA—be sure to learn about this) and they aren’t thrilled about lending to self-employed individuals, either (a salary is golden). Due to a life insurance policy mandate to secure the loan, borrowers over the age of 60 will also have a hard time. All that being said, it’s not impossible. We recommend our clients speak to our preferred broker before setting out on a purchase, unless they prefer to pay cash. See our website to contact Kim Bingham at Private-Rate (be sure she knows we sent you).
When it comes to the purchase process, this requires an education that takes a whole lot more than 20 to 30 minutes. Nothing is simple in France and this follows suit. In essence, a Notaire, or property attorney handles the transaction. The buyer (and seller) sign a pre-sale agreement that allows the buyer to retract the purchase within 10 days following that date of signature. A 10% deposit is paid at that time and held in escrow by the Notaire. About three months later, the final deed is signed. That sounds simple enough, but trust me, there are many hoops to jump through in between all that happening to come to a final and happy transfer of title. Allow a good four months from the point you find the property!
The good news is that while there’s no way we’ll get all this packed into a 20 to 30-minute presentation, the bottom line is that we’re here for you every step of the way…and that means you can rest assured most pitfalls along the way will be avoided.
I hope you tune in to International Living’s “Best of Europe Private Screening Online, May 22-23, 2021.” But if you do miss it, you just got most of right here!
A la prochaine…
Adrian Leeds Group®
P.S. Don’t miss today’s 2nd Quarter Expats in France Financial Forum. It’s TODAY at noon EDT! Details and registration here.