Larger deposits demanded by UK banks

In the wake of the econmic crisis, British banks have started asking mortgage applicants for larger deposits, which according to Rightmove could have an adverse effect on property prices. First-time buyers now need a 25% deposit instead of the traditional 10% common before the crisis. And according to the Council of Mortgage lenders, 80% of first-time buyers aged under 30 need the assistance of their parents to finance their purchase, pushing up the average age for a non-assistd purchase from 33 to 37 years.

In many ways, the British housing market may gradually come to resemble that in France, where buyers purchase essentially with a view to the long term (for occupation or investment) and banks maintain their traditionally cautious lending policies - a loan being based on the borrowers ability to repay, rather than the notional value of the property, with monthly payments not allowed to exceed one-third of income.

The higher cost of transactions, which include agents' fees, Notaire's fees and government taxes and charges, also serve to discourage frequent property purchases with a view to 'trading up' and making a short term profit. Many first-time buyers are in fact older than their British counterparts, and may choose to establish their main home in a rented property (for example in a city centre where the cost of buying is prohibitive) and buy a second home in the countryside in which they will eventually retire.

Commentators on the article* have generally applauded the idea of higher initial deposits, with some suggesting it is time British house buyers get used to the idea of regarding their home as a cash-making asset instead of somewhere they intend to live for a long time.

Source - Philip Aldrick, Daily Telegraph 30 August 2010.

Can journalists 'talk up' property markets?

An astonishing report in the Irish press tells of a goup of overseas property investors who are contemplating suing property journalists, claiming that their upbeat descriptions of variour property investment opportunities abroad caused them to lose money, when property prices subsequently collapsed. Among the markets cited in this context are many former Eastern communist countries that have recently become independent and in some cases joined the European Union, and areas such as Florida, Dubai and the Spanish Costas. Speculative investments became popular during the 1990s and reached a peak in 2002, only to collapse a few years later leaving investors facing heavy losses.

Whatever the outcome of any proposed legal actions, a number of lessons can be learned, among them the need to check and double check any proposed investment opportunity, particularly in newly developing and largely untried areas, and particularly if the prospect is offered of more than average returns from rental income.

Regrettably, property buyers are often dangerously casual about about their investments, as has been witnessed in France during the mini-boom in investment properties destined for rental, under various government tax saving schemes (Robien, Borloo etc). Anecdotal evidence suggests that more than 50% of 'investors' failed to actually visit the area and the property they were buying within France, to verify if the rental levels promised by developers were actually achievable.

What many found to their cost was that many buy-to-let properties had been built in unsuitable locaations, remote from towns and centres of employment, and lacked basic facilities such as nurseries, schools, shops, and public transport - all major deterrents to prospective renters on low incomes, to whom these properties were primarily addressed.

When they finally woke up to the reality of nil or reduced rental income from their investment, many buyers found that their properties were often badly constructed, largely unlettable and in many cases unsaleable. Many have since been heavily discounted and sold, often by the original developers.

Buying French property rarely promises high short-term profits and should only be considered as a long-term investment. Rental income is unlikely ever to contribute more than half of the monthly mortgage repayments, with French banks insisting that loans on based on your ability to repay rather than on the notional value of your investment.

Fancy owning an olive grove?

One of the most interesting property search requests I have had was to help an English couple find an olive grove somewhere in the south of France. They ideally wanted a property they could also live on, within reasonable distance of a largish town (providing a market for their olives and olive oil), and land that was already certified organic or capable of conversion in the coming years. I am telling the full story of the search and hopefully their final choice, starting in the September 2010 edition of French Property News.

Energy performance label for properties

After the 1st January 2011 an energy performance label will have to be included in descriptions of French properties offered for sale or to let (loi Grenelle 2). The label - rated from A to G - is similar to that already applied to domestic items such as a refrigerator and to new motor vehicles, and is designed to highlight whether a house or apartment is rated as 'energy efficient' or one that is likely to be expensive to heat. The French government emphasises that buildings are responsible for 21% of CO2 emissions and 43% of energy consumed.

Estate agens are already asking whether a poor rating will have an effect on the saleability of a property, and note that vendors will have to organise and pay for a 'diagnostic de performance énergétique' (DPE) before putting their property on the market.

Low ratings - E, F, G - indicating that a property is costly to heat, due for example to poor insulation, may encourage potential buyers or renters to ask for a reduction in the asking price, according to a spokeman for FNAIM, the main body representing estate agents in France.

The new regulations may give a boost to the market for new-build properties while having an adverse effect on un-renovated older properties, including many dating from the building boom of the 60s and 70s along the French Mediterranean coast.

Top five tips for buying your home

An interesting piece in the Daily Telegraph recently (about property buying in Portugal) offers some useful tips which are equally applicable to buying a home in France. They are:

'Take your time - never be rushed or pushed into purchasing'

'Get independent legal advice' - Not always necessary if your French Notaire or agent speaks enough English to guide you through the various purchase documents, from pre-contract ('compromis de vente') trhough to completion. An adviser on the spot who knows the area and the local property market is helpful if you do not speak French and are unfamiliar with the French property buying process.

'Choose your area carefully' - Always important with a vew to a future sale, even if you intend to live in your new home 'for ever' unforeseen circumstances may force a change.

'Research what you can renovate' - Be aware of planning permissions, likely costs and regulations regarding what is and is not possible, particularly in areas classified as of historic interest and requiring permission from Batiments de France.

'Be willing to wait' - France like Portugal is slowly pulling out of recession but there are no quick profits to be made from buying and selling property. Properties are rarely offered at huge discounts, and you have to look at your property as an essentially long term investment.

Source - Leah Hyslop, Daily Telegraph 26 July 2010

Studio apartment in Argelès-Port

I am helping friends sell their property in Port-Argelès as they have run out of space and need something larger, now they have decided to live here almost pemanently. Details are posted on http://www.argeles-apartment-sale.blogspot.com/ if you are interested. This is a private sale by the owners.

Living on the top floor

An interesting article in this month's French Property News* explains some of the advantages of living on the top floor, a point to bear in mind when buying an apartment in France. I have always favoured the top floor of buildings, provided it is not much above the third floor (a personal choice, though I lived for many years on the sixth and ninth floors of apartment blocks in London), and many people will not consider living higher than, say, the third floor if the building has no lift. I currently live on the second and top floor of a building facing south east and a leisure port, with a large terrace; whereas the Mediterranean side of the building rises to four floors, facing east, and tends to be cooler in summer after midday.

Older buildings may not have a lift installed. This is often the case with older buildings in Paris, particularly where a series of 'chambres de bonne' (servants quarters) have been converted into desirable apartments with stunning views. However they are invariably located at the rear of the building and access is by the 'back stairs' with no possibility of finding a lift.

Aside from that, top floor apartments offer a number of advantages, not least that of sound insulation, particularly in older buildings and conversions. Sound from below is less intrustive and easier to control by installing a 'floating' wood floor or buying thick carpets and rugs. Top floors offer the prospect of more light and air compared with the lower floors, where you can end up looking into the apartment of your neighbour.

On the Mediterranean coast there is the prospect of sea views or views over the rooftops of an historic town or village, and the almost certainty of a roof terrace for sun bathing and enjoying meals outside. Not unnaturally, top floor apartments can command a premium, ten per cent or more according to Rebecca Russell, author of the article, compared with lower floors, even in older bourgeois  buildings without a lift.

The presence of a lift means higher services charges paid to the building managers (the 'syndic') for maintenance and eventual replacement - many older lifts are currently being renovated or replaced to comply with new safety norms. Buyers, according to Russell, should also check that the building is well maintained, particularly with regard to the roof, as top floor apartments are among the first to suffer the results of high winds and rain storms common in the south of France.

However, the author concludes, top floor apartments invariably hold their value, are ideal for renting and in every way represent a sound investment should the time come when you wish to sell.

* French Property News, August 2010.