French Property News, January 2013

In the January issue of French Property News I offer a few tips on how to sell your French property in what is currently a slow market - up to 20% fewer sales than in 2011. My main advice is not to be panicked into reducing the asking price, as all the evidence shows that this does not guarantee a sale. Much depends on the type of property and its location, with the sale and purchase of second homes (which represent 70% of the housing stock in ly locality) particularly difficult. As a discretionary purchase, buying a second home is generally not what people do in times of crisis and the general uncertainty about the new fiscal and social policies of the French socialist government.

Good marketing tactics include choosing the right type of agent - if your property is likely to appeal to British buyers, then use an agency that is exoperienced in this market. Sales details should be written in English, with good photographs of the property and its location. You can also market the property yourself using the many websites addressed to international buyers.

The good news is that in line with the rest of Europe, France has an aging population, with large numbers (30%) coming up to retirement in the next few years - those born in the 1950s onwards when France was at its most prosperous and who enjoyed 30 years of job security during the post-war reconstruction boom.. Many are already home owners and have the necessary ressources to move south in their retirement. They could be just what is needed to revive a flagging property market.

Expulsions, re-possessions, forced takeovers....

While most of Europe is in crisis, the property market is suffering from a number of problems, some of them preculiar to France.

Currently the new socialist government, and in particular its extreme left wing housing minister Cécile Duflot, are making the usual noises about France's 'housing crisis' - in a country where 10% (3 million properties) of the housing stock comprises second homes, and at any one time up to two million properties are vacant (between tenants, awaiting sale, awaiting planning permissions etc). In addition, there an inumerable redundant properties on the market - including some 600 former convents and other buildings owned by the Catholic church, some on offer for a token 1 euro - belonging to the government (former law courts, libraries, regional offices), public organisations (former railwway stations, warehouses owned by EDF), the army (former barracks), banks and insurance companies etc.

Many of these buildings have reached the end of their useful life and require considerabl investmnt to convert them into acceptable dwellings, conforming to current norms for safety and comfort. Many also are in locations where people do not want to live (typically army barracks or former Church properties, industrial buildings), for lack of work opportunities and public transport and other facilities.

Surprising therefore that the housing minister has announced that the government is preparing to take over a number of redundant buildings belonging to 'personnes morales' (institutional as opposed to private owners), reportedly 'within a matter of days' in an effort to house the homeless. Certain key cities are to be targetted and also the affluent Côte d'Azur! Mme Duflot insists that everything will be done legally but given the cost of, say, converting a former office block into housing, questions must arise as to who will pay and how long the process will take.

More sensiblse for the French government to free up the existing traditional housing market, which is currently stagnating, with 20% fewer sales recorded in 2012 compared with 2011. Potential buyers are holding back, due to concerns about their job security and the lack of available credit - interest rates are low but conditions are more stringent, including the need for a substantial deposit. Owners who wish to sell, particularly in the case of second homes, are confused about possible favourable or unfavourable tax changes hinted at by the government, while prices remain generally stable as potential vendors are reluctant to reduce their asking price, even if a buyer can be found.

Paris - short-term rentals under threat

Owners of furnished apartments that are let out short-term to visitors and tourists are once again facing threats of prosecution by the socialist Mairie de Paris.

A recent article in the LeMonde tells the story of one such owner who, as a frequent user of furnished rental apartments on his visits to the capital, decided to invest an eye-watering 350 000 euros in a two-room apartment in the fashionable Marais district, paid for by a mortgate of 2 500 euros per month over 20 years.

Between the owner's visits the apartment was let furnished and rapidly produced an income of around 1 700 euros per week, less agency fees and charges for cleaning and changeover. All was going well until a fellow resident in the block where the apartment was located issued a complaint about noise and continual disruption caused by the comings and goings of short-term tenants, and threatened to report the situation to the Mairie.

The Paris Mairie has the unenviable task of trying to cope with the capital's perennial housing shortage and therefore discourages - and even forbids - such short term rentals, arguing that they deprive the resident population of affordable housing. Hoteliers concerned about their own livelihood have added their voice but are challenged by those anxious to encouarge tourism and offer an attractive form of accomodation that is popular with visitors to Paris - and incidentally many other European cities. Over 100 estate agencies are reported to be engaged in the short term rental business in Central Paris. There have so far been only 15 legal cases brought by the Mairie against owners.

Wherever apartments are let, particularly short term, conflicts can arise between resident owners and those who are virtually absentee landlords. This occurs in holiday areas, where second homes are left empty for 10 months of the year but can account for 70% of the local housing stock. Nationally, 10% (or 3 million) of French properties are classified as second homes, out of a total 30 million properties. Again the rental market is huge and encouraged by communes living off seasonal tourism. An active and vigilant owners syndic (management team) offers the most effective means of resolving any conflicts that may arise.

Potential buyers of property in resort areas should ideally inform themselves of current legilsation on short-term letting, local bye-laws and the policy of the building's managers.

Why properties remain empty?

Despite France's housing crisis, an estimated 200 000 apartments and houses remain unoccupied, sometimes for several years.

A recent article in the French newspaper 'Libération'* gave some clues. Aside from (private) landlords who have had bad experiences from tenants who did not pay the rent or left the property in a dilapidated state, many properties remain empty for long periods awaiting planning decisions. These can involve not only the local commune - such as a decision by the Mairie - but th consent of all the residents if the property is owned as part of a condominium (in French = 'copropriété'). Decisions of the owners can overule those of the local commune even when outline or full planning permission has been given - for example to change or extend an existing property. Many co-owners refuse to give their approval, in order to avoid the inconvenience of several months of building works, often prefering to 'leave things as they are'.

Where unused or surplus buildings are publicly owned or are the property of large corporations, it may take months or years to reach a decision about what to do with them. And even when a change of use is agreed, further time is need to secure the necessary planning permissions, consult with architects and put works out to tender, before any construction can begin.

In terms of revenues from renting, an occupied property is generally worth 10 or 20 per cent less on the market, so owners tend to leave them empty or un-let pending a sale. Buildings let as offices command higher rentals than if they are converted into apartments.

French law is highly protective of tenants, even bad payers, and there is a block on expulsions during the winter months. As a result many landlords prefer to keep their properties empty (in anticipation of a sale) or  for short-term furnished letting where the rules are easier, rentals are higher and the turnover of tenants more frequent.

A French TV investigation** into the housing crisis examined the situation in British cities such as Birmingham which has a policy of searching out empty properties and entering into an agreement with landlords, under which the local council agrees to bring the properties up to standard, find a suitable tenant from their waiting list, and recoup its costs for the repair works, usually over a period of five years, after which future rental income reverts to the building owner. Some 80% of owners agree to these arrangements when approached, enabling many otherwise derelict properties to be renovated and occupied to the benefit of tenants and neighbours formerly blighted by an unoccupied building falling into disrepair. Rentals charged are geneally below market levels and there is no shortage of tenants seeking this type of property.

Finally, a couple of interesting statistics - out of France's total 30 million households, around 3 million are second homes, mainly located in country or coastal regions, and occupied for just a few weeks of the year. And around 56% of French own their main or principal home, and prefer to rent, compared with Britain's 70% owner occupies (and 83% in Spain, 78% in Ireland).

* www.liberation.fr 13 November 2012; ** 'En quete des solutions' Channel D8 14 November 2012.

.

Dry rot (la mérule)

In writing recently about 'vices cachés' - possible hidden defects that may only become apparent after you have bought your French home - I thought it might be useful to add some information about dry rot (la mérule) which can affect timber and other materials and is more common in parts of north-western France than in the warm south.

Dry rot attacks timbers and other building materials, frequently in older houses, and tends to propagate in dark, damp areas that may normally be concealed or inaccessible. As a result it is not easy to detect and the first sign may be the collapse of a timber structure such as a stairway or supporting beam.It is therefore of particular concern both to potential buyers, who may be faced with an expensive problem, and for vendors concerned about their responsibility regarding 'vices cachés'. Note also that it is rarely covered by building insurance policies - that is, specifically excluded!

The current technical surveys covering lead, asbestos, termites etc ('les expertises') are compulsory and paid for by the vendor, but exclude examination for dry rot. There is a proposal before the French parliament to add dry rot examination to the list of areas covered, and meanwhile if in any doubt potential buyers and current owner/vendors might be advised to call in a specialist firm. Dry rot spreads extremely rapidly and if left unchecked can be very expensive to eradicate. In worst cases, it may result in the demolition of all or part of a building.

There are various sites in French you can access on the internet, including maps showing which areas of France as most vulnerable.

French Property News, November

In this issue I have returned to the theme of sensible house buying, basing much of my article on material from the Slow Home Movement, and the excellent book by the two founders John Brown and Matthew North. In their book 'What's Wrong with this House?' they analyse a number of properties and rate them with a points scoring system out of twenty, for their efficiency, layout, suitability and so on. I have been able to reproduce plans of two similarly priced and sized apartments, with their comments.

See: www.french-property-news.com

While on the subject of smaller home buying, I would recommend the latest book in the French ArchiPasChère series called 'Bâtiments modestes réinventés' which has illusrated case studies, complete with plans and detailed costings, of fifteen property conversions, costing around 100 000 euros or less, where redundant buildings have been turned into attractive small homes. Full contact details of all the architects concerned are listed, including their websites, which can be consulted for examples of their recent projects.

See: 'Bâtiments Modestes Réinventés' by Olivier Darmon, Editions Ouest-France, price 15.90 euros.

Vices cachés

The concenpt of 'vices cachés' (hidden defects) can be troubling for both buyers and sellers of French property. Vendors may be worried they will be later pursued for defects in a property they have sold which unwittingly contains 'vices cachés', while dissatisfied buyers may try and seize on this possibility as an excuse for litigation. However, French law and jurisprudence are fairly clear on the matter.

- In order for a buyer to establish a case of 'vice caché' he would need to prove that the vendor acted in bad faith and deliferately concealed the presence of a fault or defect of which he was aware. The vendor cannot be held responsible for defects in a property of which he was not aware.

- Nor can the vendor be held responsible for defects which are obvious or visible - they become 'vices apparents' rather than 'cachés'. The vendor cannot be held responsible also for defects accepted and agreed by the buyer at the time of purchase.

- French courts have ruled that a 'serious buyer' should take all reasonable steps to assure himself that the property he wishes to buy is free of defects, for example by employing an expert or surveyor to examine and report on the state of the property.

- Any legal action started by a dissatisfied buyer must be within a 'bref delai' - failure to act promptly may persuade the courts that the buyer accepted a 'vice caché' and this his claim is frivolous.

- French law also talks of 'vice grave' - serious defects which prevent the normal use and enjoyment of a property. As with all claims for damages, a litigant must establish a (financial) loss resulting from the fault about which he is complaining.

- It should be borne in mind that purchase agreements stipulate that the buyer accepts the property 'in the state in which he finds it' and the onus is upon him to satisfy himself about the state of the property before commiting to purchase.

- In the case of new-build properties, they are covered by guarantees and insurances against defects, which will be witten into the purchase contract. 

Tax on sale of second homes - update

Since I posted the information below, the French government of François Hollande has announced that it is studying the question and - 'in the interests of getting the property market moving again' - may introduce proposals some time in 2013.

There is some talk of shortening the 30 year 'no CGT' ownership period to 22 years, and possibly lowering the capital gains tax threshold. However the government's vague talk of reforms has had the opposite effect - instead of stimulating the market, more second home owners are sitting back and waiting to see if they will pay less CGT on sale some time after 2013.

Finally, a reader has pointed out that in my earlier post I omitted to mention that non-EU owners of second homes pay even higher rates of CGT than French and EU nationals, totalling around 50%.

French Property News, October 2012

In this month's issue I have looked at the option of investing in furnished buy-to-let properties in France. This can be an attractive option, using secure annual rental agreements, compared with letting unfurnished long-term or relying on seasonal holiday rentals (a market that is dying in some areas due to the growing popularity of modern campsites featuring chalets and all facilities).

Short-stay furnished studios and small apartments located in city centres appeal largely to single people who may be mature students or on temporary assignment for their employer. They are prepared to pay higher rentals for attractively furnished properties, and there is less risk for the owner than may be the case with long-term unfurnished rentals, where tenants have rights of security of tenure backed by French law.

I have drawn a number of illustrated examples of before and after property conversions in Paris and Lyon, undertaken by Elise Franck, who has witten a book on the subject and has an interesting website (www.elise-franck.com) which includes actual costings - purchase price, fees, conversion costs, rent charged and rate of return, as a useful guide for anyone thinking of investing in this type of French property.

TGV Perpignan - Barcelona at last !

It seems that the fast TGV international train link between Perpignan and Barcelona will be operational from the third quarter of 2013 - that's about one year's time.

This is the first time I have seen a firm date given, after numerous delays, the most recent involving problems of tunnelling under parts of Barcelona close to the famous 'Sagrada Familia' still unfinished cathedral.

Journey times are estimated at 45 - 50 minutes, which will bring Barclona within easy commuting distance of Perpignan, for work, shopping or entertainmen and for using Barcelona's inyternational airport.. Currently it can take two to two and a half hours to drive. Barcelona is also notoriously difficult to get around by car and to park, though the public transport system - including the Metro - is excellent. 

Additional taxes on sale of French second homes

Since the middle of August, the French government is now applying an additional tax on the sale of second homes in France by non-resident owners. The current tax of 19% of any capital gain enjoyed, after deductions, is now increased to just under 35% with the addition of the 'social charge' currently paid by resident owners of second homes. The exemption previously applied to non-resident owners has finally been recognised as an anomaly, and the new law brings foreign owners into line with resident owners of second homes in France.

The new has come as an unwelcome shock to owners who were in course of selling their property before the law changed and now find themselves paying a further 15% on any capital gain. This follows on from the recently introduced abolition of capital gains exemption (after 15 years of ownership) on French second homes and the introduction of a modified system of reductions extending over 30 years ownership of the property before CGT is finally reduced to zero (after 30 years when it was previously 15).

An analysis of sales involving second homes reveals that the majority are in fact sold by their owners within 10 years of intiail purchase. Among the reasons cited are changing holiday habits, children growing-up and wanting to take holidays away from their parents, travel to cheaper foreign destinations, and the declining holiday rental market.

In many  holiday destinations, as much as 70% of the local housing stock can comprise second homes - typically apartments and villas designed for summer occupation, which can be difficult to sell in times of crisis. Many date from the early tourist boom of the 1960s and are now in need of modernisation, to improve sound and heat insulation, and plumbing and electrical installations which need to be brought up to current norms. Summer resorts can be deserted in winter and may lack essential services needed for year round living.

Fast house or slow home?

As part of my own personal property search, I have recently discovered the 'Slow Home Movement', a Canadian based organisation set up by two pioneering architects, and inspired by the idea of the 'slow food' movement - the antithesis of fast food! The two founders argue that in seleting your home you should also be aware of what they call 'fast houses - houses that are designed to be sold rathered than lived in'.

They set up the Slow Home Movement after organising a huge team of volunteers who between them looked at nearly five thousand new housing developments in nine north American cities, using a 12 point questionnaire and a points scoring system (out of a total 20), to determine how each property surveyed scored in the slow home test. Their questionnaire can be applied to your own searches and can be downloaded from the Slow Home website.

The Slow Home Test looks are twelve different aspects of the property, the first four relating to its environment (location, size, orientation, environmental friendliness); while the remainder concern the inside of the property, looked at room by room,  and finally how all the elements fit together. The results of their researches showed that only 11% of the homes surveyed achieved scores of between 17 and 20 points (the maximum) and the majority (47%) achieved poor ratings of just 7 to 12 points (out of twenty).

The researchers highlight four main areas of criticism: first, what they call 'Colliding Geometry' - dramatic features such as a huge stairway or awkwardly located fireplace, that clash with the rest of the property, and which 'end up fragmenting spaces in a floor plan, causing serious disruption to the way the rest of the house works'.

Under 'Redundant  Spaces' they cite parts of the house that are awkwardly designed or located, and invariably given 'False Labels' - names such as study, linrary, home office etc - design to flatter the ego and convince a buyer that they are adding value.

Their fourth main criticism was what they called 'Super-sizing' - the creation of rooms that were cheap to build but simply too large for their purpose. Frequent among these were master bedrooms and en-suite bathrooms.

Their main criticisms of the propertis' external environment included numerous cases of poor orientation in relation to other properties, and most commonly to sunlight - typically south facing bedrooms that heated up during the day and have to be cooled at night, while kitchens and living areas faced north and lacked sunlight during the day.

The Slow Home Movement is also critical of the excessive size of many American homes - 213m² (2300 square feet) compared to 76m² (818 square feet) in Britain and 113m² (1216 square feet) in France. The founders, who are architects, report that many of their clients are people who have bought large properties but after two or three years complain they have run out of space. According to the American National Association of Realtors, 20% of buyers move out of their homes within three years of purchase, victims the architects argue, of the fast house syndrome.

Interestingly, many purchasers are now adopting a different approach to property buying - investing, say, 70% in the purchase price, and spending the remaining 30% on converting the property to their particular requirements.

There is a wealth of information to be found in the Slow Home Founders' book and on their website which can be applied to your property search in France.

Sources: Website www.slowhomestudio.com for a copy of the Slow Home questionnaire and report.
'What's wrong with this house' by John Brown and Matthew North showing examples of houses and apartments and how they can be made more user friendly. Available from www.amazon.com

French Property News, August 2012

In this month's issue I have looked buying a new-build property in France. The advantages include having access to the latest building norms - such as the new BBC classification (highest level of energy efficiency), and new rules (NF C 15-100) for electrical installations in new-build properties and total renovations. I point out that French housing estates ('lotissements') are very different from their British counterparts, as most are made up of individually designed homes, each one different from its neighbour.

Many new owners also choose to self-build all or part of their new home, and in Languedoc-Roussillon where I live, builders often the complete the main works ('les gros oeuvres') leaving the owner to complete the internal finishing - partition walls, insulation, plumbing and electrics. Innovative architects are willing to help with all of this process, from initial design through to completion.

French Property News is available on subscription and is on sale in newsagents. www.french-property-news.com

French Property News, July 2012

In this month's isssue* I have written a piece headed 'Think big, live small' which has been partly inspired by my current search for a new apartment in Perpignan. Accustomed as I am to advising others, as I say in the article, because I know where I want to live and am awaiting the sale of my current apartment on the Mediterranean coast, I have enjoyed the luxury of having time to spare, being on the spot and knowing - I thought - precisely what I am looking for.

However, over the weeks and months, I have found my ideas changing, including what I used to regard as the minimum surface area I would be happy to live in. This has gradually reduced, as after studying books such as 'What's wrong with this house' **, as a lot depends on the layout and proportions of the various rooms, and that in practical terms most houses and apartments include a lot of wasted space, which helps raise the asking price, and adds to the bills for local taxes and management charges. Hence the title of the piece and my determination to manage with the smallest space possible!

'What's wrong with this house' is the brainchild of two Canadian authors John Brown and Matthew North, who are both architects and designers, and pioneers behind the 'slow home' movement - itself based on the success of the 'slow food' (as opposed to fast food) movement which has become worldwide. The authors started their drive for better houses after organising a survey*** of  4600 North American new home projects, which were analysed for their quality, judged in terms of design and user friendliness, environmental. They found that only 11% met their criteria, achieving a score of not less than 17/20 positive responses to their questionnaire.

Homes that they label as 'designed to be sold rather than designed to be lived-in'were found to have faults in four main areas they describe as:
A. Colliding geometries - awkward shapes, placements of windows/doors/fireplaces/stairways etc that looked dramatic when first seen by would-be purchasers, but made the dwelling difficult to furnish and live-in.
B. Redundant space - often resulting from A. and less than ideal placement of rooms - for example a dining room placed too far from a kitchen that seldom gets used.
C. False labelling - describing a small or awkward space as a 'guest room' or 'study' to flatter potential buyers.
D. Supersizing - creating oversized rooms - such as a 'master' bedroom or ensuite bathroom - that wasted space and were difficult to furnish in practice.

The architect/researchers also found that although the average American home over the last 50 years had grown in size from 900 to 2300 square feet, many of their clients came to them complaining they needed more space - often due to the problems noted above - and were surprised how a minimal amount of re-modelling could generate the extra space they felt they lacked within their existing homes.

The book and the accompanying property questionnaire can be of invaluable help to anyone starting their search for a property in France, ensuring that the property of their dreams literally ticks all the boxes. 

Sources: * ww.archant.co.uk for 'French Property News' and other magazines in the group.
** What's wrong with this house? by John Brown and Matthew North, www.slowhomestudio.com Available via Amazon.com
*** 2010 Slow Home Report on Design Quality in the North American New Home Market can be downloaded from www.slowhomestudio.com 

Languedoc-Roussillon most popular

According to official figures, Languedoc-Roussillon is the region of France that most people move to, either from elsewhere in France (35%) or abroad (14%) - the two groups combining to make up the 49% of outsiders who were not born within the region. The region has experienced an overall population growth of 14% since 1999.

Curiously most of the new arrivals are young, either students or job seekers (in an area of traditionally high unemployment) with only 20% retired.

Among the results of the influx are a thriving construction sector (mainly new individual houses), the development of high quality health care services, research and tourism.

France has the highest property prices

In a study of more than a dozen European countries, consultants Deloitte confirm that Frances is one of Europe's most expensive countries in which to buy or rent property. In Paris in particular, prices often exceed 8000 euros per square metre, double that in some other European capitals. France's has also witnessed some of the highest property price rises - averaging over 6% - compare with the rest of Europe. However, despite increasingly attractive interest rates at just under 4%, the French are also among the lowest indebted in Europe - about half the British average.

As always, it should be borne in mind that there are enormous variations in property prices across France, where in some areas the average price per square metre is below 2000 euros.

It was former President Sarkozy who observed earlier this year that France is the only country in the world where property prices rise during a crisis!

Source: LeParisien 12 June 2012

What's included in a property sale?

This thorny question arises frequently on the various French property forums, by both buyers and sellers, so a further clarification is perhaps opportune.

In order to avoid any subsequent disagreements prior to or at completion, buyers and sellers should agree from the outset what precisely is included in the property sale, and draw up a list of what items are included and those not. This is important as misunderstandings can occur - for example, over what is meant precisely by a 'fitted kitchen' or 'fully equipped kitchen': does it include a cooker, hob, built-in oven, refrigerator, dish-washer and so on. The buyer's expectations may differ widely from those of the seller!

Such a list can be attached to the 'compromis de vente' (pre-sale contract) and included as a condition of sale when the parties get together to sign the 'acte finale' on completion.

Buyers are advised to visit the property immediately before completion in order to ensure that the property is in the condition in which they first saw it and agreed to purchase. This includes any work that may have been done, in agreement with the vendor, but otherwise nothing should have been done to alter the list of items included in the sale.

In the absence of an agreed list (not advisable) the Notaire handling the transaction may propose an 'indicative list' which normally includes items the buyer would expect to see left behind by the vendor. Among the items most frequently disputed are light fittings, door furniture, blinds, hanging rails for curtains, heaters/radiators, kitchen equipment, hanging rails inside cupboards etc.

Living small, thinking big!

I am currently involved in selling my Mediterranean beachside apartment and finding an alternative in my nearest large town (Perpignan). As an alternative to advising clients on buying French property, I have found that I have revised my ideas over the months I have been searching (a luxury as I am not in a rush to sell), notably on the question of optimum size.

I am a great fan of small-scale living and because purchase price, local taxes and building managements charges are all more or less calculated on the basis of square metres, I have revised my personal requirements downwards. I am particularly keen to find a top-floor apartment offering good ceiling height (4 metres are ideal) and the chance to install a mezzanine, which under French regulations (loi Carrez) is not counted as official living space - but can add a third or more to the size of an apartment.

In doing this I have been encouraged by websites such as the American www.apartmenttherapy.com which has just held its annual competition to find the most attractive small space submitted by fans of the blog; and another site www.faircompanies.com which has some interesting videos on small-scale living in the town or countryside, both in America and Europe (including France).

Finally for those thinking of buying some land and doing their own thing, I recommend the latest title in the excellent 'Archi Pas Chère' series called Nouvelles Maisons* . It is in French but presents some interesting examples of houses built on small plots, offering 100 square metres or more of family living space, and using the latest technologies to provide warmth and insulation. Pictures and floor plans are included, plus the contact details of all the architects concerned.

Again I shall be writing about this in the July or August issue of French Property News. 

* Nouvelles Maisons by Olivier Darmon, Editions Ouest-France, September 2011.

Buying to let furnished

France has a huge private rental sector, estimated at 98% of rented properties owned by private landlords (compared with just 2% by institutions such as banks and insurance companies). Out of France's 27 million households, just over 11.6 million (40%) live in rented accommodation - of which 6.55 million are in the private sector.

This furnished rental sector represents a major opportunity for small investors and is a more secure alternative than short-term furnished holiday lettings - June to September in the warm south, during the ski season in the winter. Furnished rentals normally involve an annual lease (renewable) and tenants are often young and mobile, students or salary earners, and tend not to stay for more than two or three years. For them the furnished rental is a more attractive alternative to buying or even renting (and equiping) an empty house or apartment for a relatively short period.

The French fiscal authorities recognise a category of small entrepreneur or furnished property renter (loueur en leublé non-professionnel) with an attractive tax regime. The rules for 'long term' furnished rentals, based on a one year renewable lease, are less onerous than for unfurnished rentals (which provide wide protections for tenants for whom it may be their main home). They generally involve less management than, say, holiday lets requring frequent changeovers and cleaning between rentals.

I shall be providing a longer article on the subject to appear in French Property News in the autumn.

P-D de R.

Decline in new-build construction

A report in Le Figaro notes that construction of new-build properties declined by 12.9% in the first quarter of 2012 compared to the same period last year, based on figures from the French ministry of housing.

Although various commentators refer to 'the crisis' as the primary cause, it is more accurate to note that the withdrawal of the no-interest loan (PTZ) - aimed at first time buyers purchasing new-build properties - has had an undoubted effect on this sector of the market, since its withdrawal at the end of 2011. There are also signs that the buy-to-let boom, aided by policies such as the loi Scellier, bas slowed down. However many investors entered this sector without taking adequate precautions such as assessing the lettability of many new apartment bocks - only 50% even bothered to visit the site - and have been left with a property on their hands which is unlettable and probably unsaleable. The main reasons being poor choice of location, remote from public transport and other services particularly needed by tenants seeking low-cost rentals close to schools, shops and their place of work.

In another context, Standard & Poors predict a 15% drop in property prices during 2012. They are probably among the only people taking this view, and the Century21 property group talk more of 'price stability' for the next 12 months.

As always, the French property market is extremely varied. In my own region of Pyrénées-Orientales, there is a veritable construction boom south of Perpignan and in towns such as Argelès where new housing estates are appearing, specialising in individual high specification homes, built to the latest BBC norms.

Source: www.lefigaro.fr 24 April 2012

Rentals way ahead of inflation and salary rises

According to a report published this weekend by INSEE, one in five French people are spending more than 30% of their income on housing, making it their number one cost and up to 40% in the private sector, leaving those on the lowest wages (the French SMIC) with around 600 euros a month to spend on living costs after paying their rent. 

Particularly hardest hit are those living in rented accommodation, where average rents have risen by 17% between 2005 and 2010 - ahead of inflation at 8% and average wage and salary rises of 7.2%.

Source: LeParisien.fr Aurélie Lebelle 17 March 2012.

French Property News, March 2012

In this issue I have written an interesting success story, more satisfying as it concerns an old friend and university colleague, Jonathan Healey. Jonathan and his partner Matthieu Bazan have opened a superb boutique hotel in Argelès-sur-mer, in a converted maison de maitre in the heart of the old village, opposite the parish church. They offer double en-suite rooms and organic food. All the rooms have heating and air condiioning, individually controlled. You can see more on http:// hostalet.fr

Jonathan is an established wine writer and completed his studies in oenology at UC Davis (California) and in addition to offering wine courses based at the hotel has he lectured at Perpignan University and Girona University as part of their wine and tourism programmes. He also advises and creates websites for many local and distant wine producers, with clients all over France. See www.jonathanhealey.com

Building diagnostics

It is a legal requirement in France for certain diagnostic tests to be undertaken (at the cost of the owner) when a house or apartment is put on the market for sale. Over the years the tests have become more complicated and currently include not only those for lead, asbestos, termites, dimensions (loi Carrez), gas and electrical installations etc but the most recent addition a 'certificate of energy efficiency' (DPE  = diagnostique performance energique) which must be carried out and the results published the moment a property is put on the market. The other tests were normally only undertaken at the time a buyer signed a compromis de vente (initial sale contract).

The latest DPE tests were introduced at comparatively short notice and there were concerns at the time that there were insufficient qualified testers to cope with a sudden increase in demand (every property coming onto the agent's books!) and emergency training programmes were hastily put together. At a time of high unemployment many feared that it would lead to abuses.

This has proved to be the case, according to a recent report by DGCCRF (the French government department dealing with consumer protection and fraud). Their inspectors recently checked 559 diagnostic 'experts' and found that 60% (337) of them lacked proper qualifications, produced widely differing results and were guilty of over-charging - a situation that the report describes as 'tromperies' (deliberate fraud) - though there is no mention of what legal sanctions, if any, have been applied.

This is a disgraceful situation, given that vendors are obliged to have the tests done, and the only advice I can offer is to shop around and obtain a number of comparative quotes, and always check that the diagnostic expert is properly qualified and insured. His/her credentials should form part of the report which is an important safeguard for the potential buyer.

Finally, note that as part of the government's easing of planning restraints from March (allowing an additional 30% to be added to existing properties, subject to local approval) that the former SHON/SHOB (allowable constructible area) is now referred to simply as the surface plancher (floor area) and much easier to calculate.

French elections and the property market

I was recently asked to comment on the effect on the French property market of the 2012 elections compared with what happened in 2007, as there is a belief - I think unfounded - that everything is on hold until after May 2012.

Looking first at what commentators were saying at the start of 2007, the principal concerns seems to have been about interest rates and the policies of the European Central Bank, combined with statements that the French housing demand continued to be ahead of supply. Note that this was just ahead of the sub-prime crisis and the eventual collapse of Lehmann Bros bank in the USA (September 2008) which sparked off the current crisis.

Although some commentators spoke of 2008 being l'année de rupture when the spiral of rising property prices would be finally halted,  some speaking of a 25% drop till 2010, in the event prices fell by an average 3% in 2008 and 7% in 2009, but rose again from 2010.

Coming to 2012, Notaires de France have just announced 783,000 property sales completed in 2011, slightly down on previous years. However L'Observatoire crédit logement CSA any slowdown in 2012 can be explained by the ending of the no-interest deposit scheme (PTZ) which ended on 1 January and continuing general concerns - by both borrowers and lenders - about unemployment. They note that lenders are now insisting on the 33% ability-to-pay rules and even those in permanent jobs may be refused credit if the bank considers that their employer is in difficulty!

Some banks however - including Banque Populaire, BNP and LCL 5Crédit Lyonnais) - are pursuing 'aggressive lending policies' as a way of attracting new business. Interest rates remain stable and the 'loss of France's triple AAA rating appears to have had no practical effect'.

It is hard to understand the caution of potential buyers in this pre-election period. All the major parties have included statements about the need to build more social housing and free-up surplus state land and buildings for this purpose. There is also talk, even by the UMP of M Sarkozy, about capping excessively high rents that are perceived as being above the market rate. The UMP have also passed a law to allow additional construction of up to 30% on existing sites - such as adding an extension to your house - to encourage families to house their aging parents and allow the latter to vacate a larger property that could be used by a family.

France still suffers from a chronic housing shortage, as families break up and re-form, and more people choose to live alone; while at least 2 million homes are considered to be below acceptable standards and need to be replaced.

I have discussed the French property market in depth in the February 2012 edition of French Property News.  

French Property News, February 2012 (our 200th post!)

In this issue I have offered an up-to-date review of the French property market, looking at France's housing stock and how it is divided between apartments (just 20%) and individual homes of varying sizes, and 32 millions households, just over half of whom are home owners. This last figure contrasts with higher levels of home ownership in Europe - including Spain (83%), Ireland (78%) and Great Britain (70%).

Although France's housing stock has risen from 25 million in 1984 to today's figure, there is still a housing shortage due to marriage breakup and newly constitutde family units, as well as larger numbers of people living on their own. An estimated 2 to 4 million properties are considered to be sub-standard and requiring replacement, including many large estates constructed in the sixties and seventies. 

French people also own three million second homes, either inherited or purchased as security for retirement, though the majority are sold by their owners within 10 years of acquisition. Reasons given include children growing up, the trend to travelling further afield and taking holidays outside France, and the need to raise capital (noting that in the last decade some property values have risen by 150%).

Nonetheless transactions involving second homes represent just 7% of the market, though this can be considerably higher in coastal and holiday areas, where the proportion of second homes can be s high as 70% of the local housing stock. 

Source: www.french-property-news.com February 2012, Expert Advice, Peter-Danton de Rouffignac

Creating jobs in France

As we approach the forthcoming elections in France, with radically different programmes on offer from left and right, it seems the French are still struggling with the idea of simplifying the mass of rules and regulations surrounding the creation and management of even small business.

Even though the French auto-entrepreneur scheme has been a relative success (with nearly a million new business creations since its launch) the social security system remains in a total mess, divided as it is into numerous organisations or special regimes depending on your occupation. The situation becomes even more nightmarish if you undertake more than one recognised activity. A lecturer at the Sorbonne complained to me 'for the French social authorities I am two people - a lecturer and a consultant - paying two lots of charges to two different organisations. I also happen to have inherited 20 hectares of land which it is easier to simply let out to a local farmer: If I even thought about cultivating it myself, I would have to join also the special regime for farmers and growers. It is complete madness'.

Retired British people living in France are particularly badly hit, especially if they receive a British pension and depend on the French basic health care system for their sickness cover. Registering as an auto-entrepreneur (self-employed) alters all this, with loss of the basic cover and compulsory entry into a social regime covering the type of work undertaken (from craftsmen to business consultants). As a result many people simply give up, at a time when it is prudent for all of us to try and earn and save a little extra, and not have to rely on handouts from the state, even where these are available. 

As a 'victim' of this complex system I have had several meetings with representatives of the various French social organisations and explained the British system - basically explaining that you can receive a pension and work at the same time, paying some income tax (after deducting expenses) above the limit of of one's individual allowances. 'It is really as simple as that?' said one astonished official, 'Yes' I replied as I contemplated the 16 different deductions (social charges) on my payslip - in reality an A4 sheet! - which included 'pension contributions'........

France is not alone in maintaining a complex regulatory system for new business startups (a minefield of regulations, restrictions, licences and permissions) and for the collection and payment of tax and social charges. In a recent interview with young people facing unemployment in Italy, Spain and Greece, several complained of the practical barriers to starting even the smallest business, administrative delays and in some cases the need to hand over a fee (bribe) to a government official in order to get anything done.

It is surprising that in these times of crisis and large-scale unemployment, neither side in France's election campaign has come forward with anything like a solution. 

P-D de R.

68% of French property transactions handled by agencies

In a report published this morning in the LeParisien*, research undertaken by MeilleursAgents.com* shows that of all property transactions in France, no less than 68% are handled by estate agencies, compared with 19% by networks (introducing individuals to individuals) and 13% by other means, including notaires, family and friends.

The research goes on to report that out of evey 100 clients who visit an agency, 79% ended up buying through the agency - in the case of sellers, the proportion was 70%. Results for those consulting the person-to-person networks were 26% and 28% respectively.

The researchers also found that higher value properties of five rooms or more were most often entrusted to agencies by their owners (in 30% of cases), compared with 24% for studios and two-room apartments.

Signing an exclusive sales mandate with one agency resulted in a sale within three months in 77% of cases, compared with 55% where multiple mandates had been given to two or more agencies.

Sources: www.LeParisien.fr www.MeilleursAgents.com AFP/Eric Piermont

Spread of illegal homes in France

According to a report in the French newspaper LeFigaro, one of the side effects of the economic crisis is an increase in the number of dwellings being illegally built on agricultural land or land classified as non-constructible. Among the regions most affected are Essonne (Greater Paris region), Rhone-Alpes and Provence-Alpes-Cote d'Azur.

Typically small houses are built clandestinely over a series of weekends and can be completed within a month, according to one source quoted.  Local mayors react either by turning a blind eye, as it can take several years to bring a case before the courts; while others are taking tougher measures such as refusing to enable electricity and water connections.

Farmers and growers have a right under the law of 2005 to erect a dwelling on their land, but this is often abused by disguised sales or gifts to family members. The French government body SAFER is required to vet all sales of agricultural land, when notified by the notaire handling the transaction, but can remain unaware of cash transactions or private arrangements within the family.

In a recent case, I had to advise clients to withdraw from the purchase of a 7 hectare olive grove, which included a two-bedroom house built some 15 years ago without planning permission. While the owner isisted that 'the mayor knows all about it and everything is okay', my own enquiries revealed that it was known to the authorities 'as illegal, built without permission and could be ordered to be demolished at any time'. My clients eventually bought elsewhere.

If in any doubt, potential buyers of French property should make careful enquiries and take professional advice before entering into a transaction of this kind.

French property market 2012?

Several of the major French agency groupings (Century 21, Guy Hoquet, Era France) have together offered their thoughts on how the French property market is likely to perform in 2012.

According to Laurent Vimont of Centry21 and Philippe Buyens of Guy Hoquet, overall property sales are likely to fall to around to 600 000 transactions in the 12 months to December 2012, though Vimont also predicts some price rises (2 - 3 per cent on average). This is borne out by other recent surveys suggesting some price reductions, as always highly variable according to different regions - my own, Languedoc Roussillon, for example remaining stable (and recently described by the UK Times newspaper as France's new 'cote d'azur').

Era France have spoken of price falls of up to 9% in 2012 and a reduction in the numberof transactions of around 8% compared with 2011.

Various commentators have expressed different views on the potentially adverse effects of the French presidential elections (investors do not like uncertainty) and the European rescue plan for the euro. Though many argue that these factors tend to encourage investment in bricks and mortar. Interest rates remain comparatively low (4%) though as in the United Kingdom first time buyers face difficulties in saving for a deposit (due to the high cost of renting while they save) and the increasing demands of the banks for larger deposits. 

Note however that average prices for an apartment have risen by a staggering 125% between 2000 and 2011, and overall property prices (excluding new-builds) still rose by nearly 8% in 2011- well ahead of inflation.

Source:LeParisien.fr 03 January 2012