France boasts many economic factors that draw foreign investors to its property market. It is important to have an understanding of what these factors are when considering the investment potential of your chosen French property.
Property in France is known as a stable investment both for capital appreciation of between 5 and 10% and high rental yields of around 7 to 10%. Meanwhile some mini hotspots such as prime areas on the Cote d’Azur even saw growth of as high as 22% in 2005.
As a general rule, buyers look to investment property in France as a solid and stable source of reliable income to them for the medium to long term.
Under this Government scheme, purchasers buy freehold property and then lease it to a holiday company for a typical period of nine years. In return they get guaranteed rental income at average yields of 3 to 6% (some schemes guarantee yields of 5.5%). Although owners pay maintenance charges and management fees amounting to some 15% of rental income, they are fully refunded their VAT of 19.6%. In addition owners can use their properties for periods of between 2 and 8 weeks per year at reduced rates.
Due to France’s popularity as the World’s most popular tourist destination, there is always high demand for accommodation in tourist resort areas. The French, like many other continentals, do not have the British preoccupation with owning property and the vast majority rent their homes for average fixed terms of three years, allowing investors ample buy-to-let opportunities.
Property prices are still lower than in many European locations, making property investment in France still a very attractive option. In the remoter areas of the country, you may still find a renovation project for under GBP 30,000 while a typical two bedroom off-plan property in Provence could set you back around GBP 80,000.
If your property was your principal residence, you will be exempt from capital gains tax. However if the property is not your principal residence, tax will be levied at 16%, unless you have owned it for more than 15 years.
France is a modern country and is well served by a top class transportation. As a result it is easily accessed from the UK and mainland Europe via excellent air, rail and road links that give it the ease of access that all modern tourist destinations need.
Easy access to mortgage lending facilities both in the UK and in France are an added economic factor that makes investment in French property so easy. Foreigners are able to obtain up to 100% finance for their purchase and interest rates can be fixed or fluctuating, while current rates are a competitive 4%.
The double tax treaty that exists between the UK and France ensures you do not pay tax twice.
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