France Investment Strategies

The top world tourism destination and a favourite amongst European second-home buyers, France has plenty to offer property investors. Its well established real estate market offers a wide range of properties to suit both short and medium to long term investment strategies.

General Factors

France boasts the status of the World's most popular tourist market. Along with the likes of Spain, France's close proximity and easy transport links between the UK, Ireland and Northern Europe create one of the world's most established tourist markets, particularly as a long weekend break and short haul holiday destination.

France's property market is well established and has much to offer investors from a wide range of both up-market, established locations to more up-and-coming emerging markets. Membership of the G8 group of most established World economies gives France that leading edge to reassure purchasers of their final investment decision.

Many property purchasers are drawn by a well established leaseback system which is one of the most tried and tested investment models in the international market place today. Due to a very strong domestic and holiday rental market, many investors feel they can firmly rely on buying into a France's busy rental market today.

France attracts around 60 million tourists from all over the world, including approximately eleven million British tourists. Due its inherent, seductive charm and a wide diversity in tourist attractions, France has something to offer everyone, from dramatic mountains and coastlines, chateaux and vineyards to the chic Riviera or the culture-packed sophistication of Paris.

As a major international tourist destination, France's government is well versed in the supply of a solid infrastructure to service its ever growing tourist industry. With the opening of provincial airports, we are seeing an emergence of new tourist and related property markets, allowing foreigners to purchase second homes or buy-to-let investments in new, previously little known areas. This has caused renewed interest in areas such as the Atlantic coast, Montpellier and Nice as tourist destinations and property markets. Property purchasers are currently seeing an opportunity to generate healthy profits from their assets in up-and-coming tourist areas.

Economic Factors

France represents a safe and stable economic environment in which to invest in property or even make a complete change of lifestyle. As a result, an estimated half a million British people have purchased property in France and this figure looks set to increase. Factors such as increased accessibility to all areas of France via new budget airline routes to provincial airports, in addition to tax advantages and stability in capital appreciation make France an appealing country in which to invest.

The cost of living in France of course depends largely on your chosen home and lifestyle but it is generally around 25 to 35% lower than in the UK and many other EU countries, particularly in rural areas. Paris is an exception to this rule, with some of the highest prices in Europe. 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.

Thanks to the priority given by the French government to ease the purchase procedure for overseas property investors, foreigners can purchase real estate in France without limitations and benefit from the tax advantages involved in leaseback purchase.

The French government sees foreign investment in general as a way to create durable jobs and stimulate further economic growth. A skilled and productive technology-orientated labour force as well as a central European location and a strong infrastructure all attract an ongoing stream of foreign investors to France.

Political Factors

France has been a democratic republic since the abolition of the monarchy's power following the French Revolution in 1792. French politics has waved between right and left with each election, while much of the population is still vehemently nationalistic. Right wing De Gaulle and leftist Mitterand are the most famous and influential presidents in recent years and the general population tends to swing towards left or right wing ideals, while many other parties exist in between, such as the liberal UDF (Union Pour la Demcracie Francaise) and the communist PCF.

Since founder membership through Charles de Gaulle, France has come a long way towards European Union and today remains one of the most vocal and often contentious members of the EU.

The socialist government has fully and partially privatized many of the country's large institutions, including banks and insurers, while the government still controls large stakes in such giants as Air France, France Telecom and Renault as well as certain sectors of the public transport and defense industries. Meanwhile the government remains committed to a capitalist environment, while maintaining strong social spending, tax policies and laws to reduce income disparity and improving public health services. More recently income taxes have been reduced with the aim of boosting employment figures.

Natural Factors

France is a vast country, two and a half times the size of the UK and with a population of about the same as the UK; there is no shortage of open spaces and unadulterated countryside. Enormous stretches of coastline bordering the Atlantic, Mediterranean and English Channel offer varied coastal beauty, from rocky coves to cliff faces or large stretches of golden sands. Dramatic mountain ranges give way to hilltop villages and vast plains all making for a great abundance of natural beauty and experiences all within one country. These features make France an ideal holiday location and, for many, a highly desirable country in which to live.

It is easy to see why France is the World's most visited country: It abounds with fantastic cities that are brimming with cultural activity, including art exhibitions, music, dance, theatre and historical monuments, ideal for cultural tourism. Alternatively there are many opportunities to enjoy the French countryside, from magnificent chateaux, to vineyards or numerous pretty rural towns and villages. Sporting activities such as hiking, world class skiing and water sports can also be enjoyed, giving France an all round appeal to satisfy just about anyone who visits.

France exhibits a chic sense of style in many aspects of living, from its exquisite cuisine, to the fashion industry and its ornate art and architecture. The French lifestyle continues to draw foreigners to its soil. Famed for its civilized and relaxed pace of life, France holds a strong attraction for those simply visiting or even seeking to relocate to France while remaining only a relatively short distance from "back home".

Logistical Factors

Close proximity to the UK and rest of mainland Europe makes France an ideal location in which to buy a holiday home. This ease of access further fuels the tourist industry as a whole and maintains the value of your property investment.

Budget airlines such as EasyJet, Thomsonfly, Flybe and Bmibaby connect most French airports to many UK and other European destinations, making it an ideal short break away. Direct flights are currently available from Air France, Easyjet and British Airways to Paris, Bordeaux, Toulouse, Lyon and Marseille.

The number of smaller French airports also welcoming international flights has increased over the years and this, in turn, has opened up lesser discovered areas of France to become new hotspots with property buyers, eg. Perpignan and Montpellier airports as well as the Aeroport de Salvaza and Nimes-Garons airports.

Alternatively, the Channel Tunnel and cross Channel ferries allow you to travel with your car to a number of convenient ports on France's northern shores. You are then free to explore onwards via an excellent road infrastructure linking all areas of France and the rest of the Europe.

Medium to Long Term Investment Strategy

Key Opportunity

France will continue to be a highly popular destination for the British and other Europeans by virtue of its location and expanding economic climate.

With an abundance of flights and ferry crossings to France from the UK, it's unsurprising that today an estimated half a million British property owners have bought in France. Statistics from The Economist reveal that the French property market grew by 87% between 1997 and 2005, reflecting a natural positive trend towards the French real estate arena which is likely to continue. These homebuyers enjoy the privilege of owning an idyllic European property and receiving healthy profits from their investment.

Due to France's popularity as the World's most popular tourist destination, there is always high demand for accommodation in its tourist resort areas. The French, like many other continentals, don't 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. Investors commonly take advantage of a booming tourist and residential rental market in key locations or buy and resell to investors or holiday homebuyers.

There is also a strong demand for property from those foreign purchasers looking to permanently relocate or to simply invest abroad. Typically, rural restoration properties have been popular amongst overseas investors as the French dream.

Under the government's highly popular leaseback scheme, purchasers can 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 the properties can be used for personal use for periods of between 2 and 8 weeks per year at reduced rates.


Average construction time on French off-plan developments, from project sales release to completion of construction, is approximately one year. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors use hotspot locations to generate significant and reliable rental income over a period of time as sustained rental returns are their main focus, followed by capital appreciation over time.

Capital appreciation is expected to perform well over the next 5 years, notably in the newer emerging French markets such as the Atlantic coast, Montpellier and Nice, and the longer investors are able to leave capital in their purchase, the higher their potential long term returns will be.

High tourist numbers and the resulting strength in the buy-to-let market allows investors to reap in solid capital growth from their properties, all the while supplementing this income with high rental yields in many key tourist locations.

Level of Complexity

In the case of off-plan purchase, full payment for the property needs to be completed at various stages of construction, prior to final completion of the purchase.

For mid to long term investors, all costs will be applicable, while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it's advisable to open a Euro bank account in France in order to pay for the property's utilities and other ongoing expenses.

Beneficial arrangements are often to be made with local property management and rental companies that are usually conveniently based on or near the site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Managed properly, maintaining a property abroad can become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

France's ongoing popularity as the world's top holiday destination bodes well for buy-to-let investors. The French government recognises the importance of an ongoing contribution from the property and tourism sector to the boost its economy. On the one hand, this of course translates to a stable environment in which to buy or rent, but brings with it intensified competition on the other.

By appointing independent legal representation, the client can be sure that all the necessary paperwork is in place before signing the purchase contract.

Property ownership in France is mostly Freehold, leaving no room for ownership disputes.


Constant and sustainable growth in the region of 10% per annum and strong rental yields of around 7-10% per annum gross make France a stable arena for those looking for a profitable investment within a market that has a buoyant sales market and a constant demand for residential and tourist rentals.

Despite growth being slower than in other emerging markets, investors choose France as a far lower risk for more cautious investment. French property has historically increased in value generated a sustainable rental income. In addition, the absence of political instability or potential economic volatility makes France an ever attractive option.

Investors are now looking for new places within France in which to capitalize on mini emerging markets, such as areas in and around Montpelier, Nice and along the Atlantic Coast, where improved accessibility and affordable prices are enticing tourists and investors to these areas. Indications suggest it is here that the greatest amount of capital growth from the tourist market will be experienced.

The vast majority of the French population rent their homes and this factor, along with a powerful tourist industry, makes for an ideal buy-to-let market. Due to popular demand, prices are increasing and investors are currently experiencing net rental yields of approximately 7%.


Easy access to mortgage lending facilities both in the UK and in France are an added economic factor making 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%. Generally they are only available for between 10 and 20 years. The maximum term for a French mortgage is 20 years or up to the age of 70, whichever is sooner.

British lenders include Abbey, Halifax, HSBC and Woolwich who are the main providers from the UK. French mortgage lenders are often also subsidiaries of UK lenders such as Abbey National France or Barclays. They will use what is known as the "indebtedness ratio" to calculate how much they will lend you: Rather than multiplying your salary by 3.5 as is done in the UK, lenders in France require you to prove that a third of your total gross monthly income can cover the mortgage repayments. This covers anything from personal loans to utility bills and monthly mortgage payments.

Some developers of new build and off-plan developments offer installment plans over between 12 to 60 months and charges applicable vary according to developer. Although these deals can sometimes be highly beneficial, it is always advisable to shop around for the best mortgage or other finance arrangement to suit your needs.

The Government's Leaseback system offers purchase with guaranteed rental over many years and yields of some 5.5%, more than covering the cost of mortgage interest, as well as allowing a full VAT refund of 19.6%.

Release of equity from investors' other properties, be it in their country of origin or in other investment locations, can also be an easy option to raise finance for a purchase in France.


France has a large number of taxes levied on all aspects of life, including property. As a property owner, you will need to be aware of both national and local taxes:

Taxe Fonciere is a property tax that consists of taxes for the land and the building. The amount paid varies enormously according to location.

Taxe d'Habitation is similar to the UK's Council Tax and is a residential tax payable on January 1st each year by the person living in your property. You will be liable for this tax in addition to the Taxe Fonciere if you live in your property as a principal residence.

Taxe Assimilee is charged in areas such as busy holiday resorts where local authorities have to spend more on maintenance and upkeep of public facilities.

Taxe Professionelle is charged if you use your home also as your place of work.

Impot sur le plus-values (Capital Gains Tax) is not payable on property sale if it has been your principal residence. However if the property is not your principal residence, tax will be levied at 16% unless you have owned the property for more than 15 years.

Droits de succession (Inheritance Tax) are charged on a complex sliding scale on assets over €76,000. Unlike in the UK, your spouse is not exempt.

Taxe a la Valeur Ajoutee (VAT) is charged at a higher rate and on more items than in the UK. Currently TVA stands at a rate of 19.6%.

Revenue Fonciere is charged on rental income. It is payable on your long-term rental income at a rate of 25%.

Stamp Duty of 6% is levied in accordance with the value of your property.

IRPP (Income Tax) is payable by all residents in France and is based upon your annual income received.

The double tax treaty that exists between the UK and France ensures you don't pay tax twice

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