Market focus on France
Monday February 12, 2007Saundra Satterlee
Queen Victoria, F. Scott Fitzgerald and Somerset Maugham were to the Côte d?Azur what the Windsors, James Joyce and Josephine Baker were to Paris ? members of the long list of luminaries who in the latter part of the 19th and early 20th centuries were drawn to France. Move forward to today and France is still a potent magnet.
What makes France special is encapsulated in the single word ?diversity?, according to David Giraud, chairman of MGM, one of France?s largest construction companies. ?Diversity,? he says, ?not only of landscape but of food, wine, climate and culture. Added to this is the independent and revolutionary spirit of its people.? (And for this latter point, contemporary examples abound, ranging from France?s stand against the Gulf war to the recent student protests that caused the government to shift its policy on the dismissal of young workers.)
Country and economyDuring the 16th and 17th centuries the consolidation of the French state took off in earnest, resulting over the centuries in a highly centralised and bureaucratic society. Along the way, following the 1789 Revolution, ?liberté, egalité and fraternité? became symbolic of ?the French way?. Although the industrial revolution arrived somewhat belatedly compared to England, France has nonetheless become a global economic powerhouse.
Nowadays France is a leading world economy. Its poverty rate ? less than a third that of the US ? is one of the lowest in the world, and its health and education systems are amongst the best. Income inequality remains low despite high unemployment. The IMF predicts 2.2% annual growth over the next five years.
Property marketThe property market is robust. ?We?ve seen a huge price boost over the last five years of at least 25% per year in most regions, and perennial favourites like Paris and Côte d?Azur have doubled over the last five years,? says Alexander Kraft, CEO of Sotheby?s International Realty France & Monaco. ?At the moment value is still very good ? the money you?d get from selling a London garage in Belgravia could buy a chateau in France.?
Foreigners continue to flock to France, and increasingly on a permanent basis. ?Our November 2006 property survey found that 100% more UK buyers intend to move to France in 2007 than did in 2006,? says Trisha Mason, managing director at VEF property specialists.
According to Suzanne Clay, Barclays Bank European business development manager, ?those who buy property in France look to immerse themselves in the culture, unlike buyers in Spain who seek the sun.?
That the rich and privileged no longer dominate the French property market is reflected in the average price for French property, which Clay puts at ?180,000. Property is always sold as freehold, not leasehold. But don?t be confused by leaseback purchase.
With a shortage of accommodation in major tourist destinations, the French government devised the ?leaseback? scheme as a way to increase the number of properties available to the tourist industry. Under the scheme, a self-contained tourist apartment is purchased in a development and leased back to a management company, which then lets it to holiday makers on behalf of the owner.
The scheme applies only to new or rebuilt properties, states a Mintel research report, and is particularly popular in the Alps, but is also found in Paris and French coastal towns. ?Leaseback is a hassle free, no worries investment,? says Gabriel Mingeon, MGM commercial director.
Leaseback typically pays a guaranteed rental income and allows two to four weeks stay a year for a minimum of nine to 11 years, or even up to 20. The number of years is dependent on the local council and/or variations by the seller.
?Never buy leaseback as a short-term investment, think long-term capital growth,? advises Giraud. Clay sees it as a good way to get on the property ladder while receiving a guaranteed income.
The Côte d?Azur and Paris rank top of the property buying agenda, followed by the Alps. For those who cannot afford the ever-popular Provence, the Languedoc Roussillion region ? from Montpellier to Perpignan ? is gaining in ground, as is Bordeaux and the Charente. In Languedoc a new vineyard estate is selling freehold with the option of leaseback, starting at ?201,000 for a place with one bedroom, from Premier Properties. For anyone with a penchant for Gascony, a large country house dating back to the 1900s ? and with a pool ? is just under ?500,000 from Purslow?s Gascony.
Although almost no corner of the French property market is untouched by foreigners, in ?little known? Auvergne, VEF has a restored former village school with three bedrooms and under-floor heating that requires ?finishing off? for ?145,914. Or in secluded countryside grounds, VEF is selling three mill-houses for ?327,094, of which one is habitable.
Nearby Burgundy ? where you can buy a large manor house for ?500,000 or a small chateau on several hectares for ?1m ? could be the next hotspot, predicts Kraft. But if you aspire to a 16th century chateau in ?off the beaten track? Normandy, Sotheby?s is selling Chateau Honfleur, including a pool and at the edge of a national forest, for ?915,000.
From well-known Chamonix to as yet undiscovered Chinaillon, the French Alps are rich in new ski properties. MGM has developments throughout the region.
Chinaillon near the small village of Le Grand Bornand is built into a rock face on the side of a picture-perfect Alpine Valley. With 90km of runs and soon to link up to 130km of neighbouring runs, Chinaillon ? an hour?s drive from Geneva airport and near Lake Annecy ? has 250 two and three bedroom apartments constructed from traditional wood and stone, an MGM trademark.
The area is the centre of Reblochon cheese production. ?Agriculture carries the same economic weight as the revenue from the local ski lifts,? explains Giraud. ?Wherever we build, MGM takes into account local environmental and economic concerns.? Sold as leaseback, two bedroom apartments start at ?233,000. ?Prices in Chamonix are 40% to 50% higher.?
At Villa Princess in Chamonix, eight two and three bedroom apartments are priced from ?525,000. Nearby is a chalet renovation at the foot of the ski slopes with a massive 212sq metres of living space and a price of ?2.3m to match. Or at the development of ?Bisanne 1500? near Les Saisies, prices for one to four bedrooms start at ?171,000 and at the unspoilt village Cohennoz, from ?160,000. The above four are MGM freehold projects.
Shifting to Paris, Sotheby?s is offering a huge period apartment for ?1.9m or from Knight Frank is an Ile Saint Louis modernised apartment for ?449,000.
On the Côte d?Azur, a St. Tropez waterfront villa is ?3.2m from Sotheby?s, or in the hills above at Gassin, Knight Frank is selling a range of golf properties. To the west and for around a third less than a similar property in St.Tropez is the MGM development at Cavalaire sur Mer where 100 two to four bedroom apartments start at around ?350,000. Further inland is the Provençal-style village of Pont Royal on a Ballesteros golf course where MGM have properties upwards of ?254,000.
Pitfalls and practicalitiesDespite the sophistication of the French state and its real estate purchase procedures, there is no substitute for independent tax and legal advice. Do not make the mistake of thinking, for example, that the initial purchase document Compromis de Vent is not binding. Although not signed by a notary, the contract is irrevocable.
Prior to signing anything, check the legal documentation of all buildings and make sure that the specifications listed in the paperwork match actual dimensions. Also always check that the property?s parameters conform to the documentation. ?There is lots of illegal building in France, constructed without appropriate permission,? cautions Kraft. If you rely on good faith, you could lose out.
Although French property laws and taxation relating to real estate are standardised (with few exceptions), Christian Kalin, partner at Henley & Partners, warns that zoning laws and rights of land use vary locally.
You?ll be taxed on rental income and French inheritance laws are complex. For an overview of purchase procedures see the Barclays buying abroad website.
Henley & Partners
Sotheby?s International Realty France & Monaco