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

Renting versus buying

A survey published by zoopla;co.uk and published in today's Daily Telegraph reports that in 47 out of 50 large towns in Britain the cost of renting exceeds that of repaying a mortgage. In the case of London it costs 31% more to rent a property than to buy. As a result, potential buyers are faced with ever higher rents, making it even more difficult to save for a deposit.

Compared with Britain at 70%, France has a relatively low level of ownership of principal homes (at 56%), well behind other European countries such as Spain, Greece and Italy. Out of 27 million French households, 43% are renters, with 11.6 households choosing or being obliged to rent. With over 3 million second homes, many choose to live in rented accommodation (as their principal home) and 'invest' in the second home, either for rental, holidays or eventual retirement.

During the current economic crisis, the French property market has been slower than normal, as French banks and mortgage providers excercise more than their usual caution regarding deposits and the one-third income rule - even though, as in Britain, monthly rentals can equal or sometimes exceed rental payments. The banks' traditional insistence that borrowers should show evidence of a long term work contract (CDI) seems somewhat archaic in view of continual employment uncertainty, and the growing numbers of newly self-employed (an estimated half a million, though many part time, created in the last two years).

Source: www.telegraph.co.uk Property

French Property News, December 2011

This month's issue looks ahead to the major London property exhbition in January which normally provides a post-Christmas stimulus to a market that is traditionally quiet from mid-Novelber until early new year.

Based on my personal experience of currently selling my property on the Mediterranean coast and moving inland to Perpignan, I have been forced to analyse my needs and requirements (budget, amount of space, long term prospects etc) and ask myself the sort of questions which face every potential French property buyer - I include my Twelve Golden Rules for Successful Property Searching.

Also some of the frustrations of property searching, not least of which are the major property websites - one boasting nearly 800 000 French properties came up with nearly 350 meeting my basic parameters; and the poor quality of both photographs and descriptions - such as 'city centre' (well, there are parts I would not consider living in), floor level (I prefer a top floor), charges and taxes (which can vary widely), all the sort of information I want to be in possession of before even considering a visit.

Buying to let

An interesting article in the French daily newspaper Le Figaro has highlighted the situation of people who invested in French property to rent before the spectacular price rises of the 80s and 90s compared with the situation today. Investing in studios and apartments to rent was particularly attractive to future pensioners at the time, with one example cited of a lady able to add some 1 500 euros monthly to her retirement pension (in addition to a further 1 500 from her employment!).

Another investor, a lady teacher, recalls buying three studio apartments in a sort-after area of Lyon, spacing the purchases over a period of ten years each, giving her time to repay the bulk of the mortgage. She reckoned on contributing a further 100 to 150 euros a month, but overall is currently earning a 6% return on her investment. For someone starting out today, this would be more likely 2.5 to 3 per cent, she admits.

Although monthly rentals are now approaching the levels of mortgage/loan repayments - and in some cases exceeding them - many investors admit that the market is less attractive than it used to me. Among the complaints cited in the article include higher taxes and charges, including the new CGT rules on resale, the higher turnover of tenants and the attendant costs of refurbishing the property between rentals; and unpaid rents as tenants disappear when unable to pay the rent due to job loss or other circumstances.

In the correspondence following the article, many complain of the attitude of French banks towards new borrowers who are forced into renting when they could easily afford monthly loan repayments, and the resulting rise in rentals. For their part, landlords talk of increasing irresponsibility among tenants and complain that the new laws allowing them to accept only a one month deposit mean that tenants can leave behind them a trail of damage, with subsequent repair costs and loss of rental income to the owner.

Source. LeFigaro.fr 19 november 2011

French Property News, November 2011

In this month's issue I have taken a look at France's buoyant rental markets, from the point of view both of owners wishing to rent out their property, and renters needing guidance about how to secure the best long or short term deal. France's rental market is highly controlled and tenants are carefully protected by law from summary eviction, including in cases of non-payment of rent. However, many French choose to rent, particularly in large cities where the cost of buying an apartment may be prohibitive, and instead invest their savings in a second home in the country or on the coast, which may have been in the family for several generations.

The article also looks at seasonal/holiday rentals and the formalities that need to be completed in order to reach a satisfactory agreement between owner and tenant - guarantees, responsibility for repairs, periods of notice, a tenant's options to buy are all covered. 

French Property News is on sale in newsagents or see www.french-property-news.com

Spending on your property to beat the downturn?

According to an article in today's Telegraph* newspaper, many Britons are being advised to spend money on improving the property they already own, in order to 'prepare it for the market' when prices are predicted to rise again in two or three years time.

However, the writer Caroline McGhie, offers some words of caution - including not over-spending for example, to the extent that a property stands out as 'expensive' compared with other houses in the same street. It is well known that seekers of four-bedroom houses do not search in a three-bedroom street, and adding luxury items such as a swimming pool or jacuzzi can tend to put a property out of context with its neighbours. After all, birds of a feather tend to flock together...

Some estate agents also advise caution - not spending excessively on a property that is already seen as at the top of its price range, and thereby making it stand out among similar properties in the area. Another advises that certain improvements are only worth their cost if the owners are convinced they intend to stay in the house long term - and who can tell these days? - rather than sell up and move within a couple of years.

Will it work in France? Although as the previous post (below) indicates the French are 'starting to think more like Anglo-Saxons' and see their home as an investments as well as somewhere to live, transaction costs tend to be high, including agency fees, the notaire's fees and French government taxes. As a rule the French are reluctant to change areas, for eample to find work even in times of recession, because of family ties and responsibilities - children in school, spouse's own job, caring for ageing parents.

However, mong the principal reasons for moving are the need for more space, as children grow up and more bedrooms are needed, so any improvements that offer more living space as opposed to greater comfort will generally add value to a property, though all the cautions noted above also apply.

* The Telegraph online, 01 November 2011