Monday, September 27, 2010
Selling up and moving back
Second homes do not come cheap and the cost of owning and running them are among the reasons why many second-home owners decide to sell up and - if they are foreigners - return home or decide to take their holidays elsewhere than in France.
France has one of the highest levels of second-home ownership, and in the Mediterranean coastal region where I live, around 70% of properties are second homes, occupied for only a few weeks of the year. They comprises mainly studios and apartments in co-ownership buildings, holiday villas sometimes located in a complex with a pool and other facilities, and villas or older house a few kilometres inland. As a result outside the main holiday season, many properties lie empty and the coastal resorts are deserted from October to the following June.
Some second homes may be owned as part of a family inheritance, due to France's peculiar successions laws which favour keeping acquired property within the family. Second homes also attract capital gains tax if sold within the first 15 years of ownership, although there is 10% per year relief in years 6 to 16 after which there is no CGT to pay - as is the case with your main or principal home. Newer buildings approaching their 15th year and in which owners may have bought apartments off plan at the time of construction may suddenly lose a number of owners simultaneously as they approach the end of the capital gains period. The resulting glut of similar style properties can force prices down and offer attractive bargains to buyers.
Second homes that were originally purchased with a view to family holidays can also lose their appeal, as children grow up and adolescents want to holiday separately from their parents and explore places outside France. A decline in the summer rental market may also provoke sales of second homes, as is happening along the Mediterranean coast. Owners who have failed to upgrade their rental apartment or villa are facing stillf competition from camp sites, many of which have upgraded their facilities, providing modern chalet style accommodation, swimming pools and numerous other attractions for their clients. During the summer, many of these become veritable holiday villages with 5,000 or more residents in place.
Costs of maintaining the second home are also another factor considered by vendors, as the prices of utilities, local taxes and leisure (especially eating out) have continued to rise, forcing comparisons with the cost and attraction of holiday packages, including villa rentals, outside France.
Second home owners from Britain and Ireland especially who were attracted by convenenient low-costs flighs to nearby airports are now finding many flights reduced or diverted to more distant locations - both in the case of departures and arrivals. With journey times extended to a day or more just to take a short flight, many owners are questioning whether they want the hassle of travelling by air associated with short visits of a week or less. The good news is that areas which can be easily reached by car and increasingly fast TGV trains will attract second home owners disenchanted with low cost airline services.
The French themselves have always favoured locations no more than two hours drive from their main home, and it is generally economic and family considerations that influence the decision to sell. However, research show that the majority of second homes are nonetheless sold by their owners within 10 years of purchase, even during times of relative prosperity. In times of crisis, leisure spending is a major item that can suffer as family budgets are cut back, and the second home may be sold if for example it is not producing revenue from rentals and the costs of buying and running the property are simply too high.
The exceptions are properties intended for eventual occupation in retirement. Owners who thought long term and bought before 2002 have seen the value of their investment rise steadily or hold its value, even during the recent economic crisis. With the comparatively high transaction costs (agency fees, Notaire's fees, registration charges and taxes) associated with buying a property in France, you need to take account of these factors when deciding to sell your second home, or hold onto it in the expectation of better times.
Labels: Selling French property