Not all idyllic French roads lead to Provence
Despite the recession, Julian Knight finds that France still has what it takes to cast a spell over British homebuyers
Sunday 19 July 2009
There is little not to like about France. The hot, long summers, the culture, the food, the open spaces and, of course, le vin.
For many Brits the idea of living across the Channel is a dream to be followed once the kids have flown and the time has arrived to leave the rat race behind. What's more, those looking to France may be heartened by the fact that the market is more stable than in Britain.
"We didn't have the big bubble in France as in the UK or US, therefore we haven't had the bust," says Marc Achard, marketing director of French property firm Garrigae Resorts. "Obviously, there was a slowing down in the later part of 2008 with the economic problems, but we have seen signs of strength again of late."
Unlike the British, the French don't pore over the latest house price figures; growth when it comes tends to be slow and steady, while falls aren't as dramatic: "France hasn't been affected as badly because they weren't allowed to borrow anywhere near as much money as the British," says Chris Bishop from UK-based French property specialists Latitudes. "There are strict laws on lending."
According to Mr Bishop, Britons who own property in France seem keen to cash in on profits already made thanks to the performance of sterling: "The euro has strengthened against the pound and this means that Britons who have bought in France have enjoyed an uplift, so quite a few are looking to cash in which ensures a steady supply of new instructions."
For those Brits looking to buy, popular locations include Normandy and Brittany, due largely to their proximity to the UK, and Provence, which has an idyllic image and a long-established British ex-pat community.
But Provence can be expensive relative to other parts of France, so bargainhunters are increasingly focusing on the Languedoc area in the south. "This area has a lot going for it: you are a short drive away from Mediterranean beaches, skiing in the Pyrenees, and the countryside is lovely. And the prices are appealing. We have a two-bed stone cottage available for just €83,000 (£71,000) in Languedoc, move this property to Provence and you would pay nearly double," says Mr Bishop.
Interestingly, new developments are still being built in Languedoc, in sharp contrast to many popular holiday home locations worldwide where developers are mothballing projects. Latitudes is marketing Château Les Carrasses near Hérault, a former wine domaine, with villas starting at €207,000.
Elsewhere in Languedoc, Garrigae Resorts has launched its Les Jardins de Saint Benoit, a luxury development of 171 one, two and three-bedroom villas with prices starting at €205,000. All the villas are finished to a very high specification and the three-bed properties have swimming pools. The site is managed as a resort with a large on-site swimming pool, luxury spa and a fine dining terraced restaurant. Buyers even get a case of wine each year from the on-site vineyard.
In addition, Garrigae has built 11 large, two-bedroom, sea-view apartments in the fishing port of Marseillan. The Port Rive Gauche apartments, again kitted out with the latest gadgets and stripped wooden flooring, start at €425,000. Marseillan, like the rest of Languedoc, is understated: "What really appeals is that many of these ports remind visitors of the Riviera back in the 1950s before the big developments happened," Mr Achard says.
Les Jardins and Port Rive Gauche are available on a leaseback basis. Put simply, buyers agree to the resort letting out their property to holidaymakers for nine years in return for a guaranteed rental of just over 4 per cent a year. The level of income depends on how long the buyer wants to spend in the property. If the buyer chooses to spend just two weeks in their villa they will maximise their income, spend six months and income will be lower.
The biggest provider of leaseback properties across France is Pierre & Vacances. This long established firm has more than 50,000 properties on its books and guarantees rental for nine years, after that the buyer can enter into another rental agreement, rent it out themselves or simply move in permanently. Again, rent guarantees are around the 4 per cent mark and prices start at €100,000, although they soon climb in ski and beach resorts.
Despite the global downturn, financing a property purchase in France can be relatively straightforward. "The key message is that French banks are still lending. You can even find mortgage loan to value of 100 per cent, not including stamp duty and other fees," says Chris Ellis of Charles Hamer Financial Services, which specialises in the French mortgage market. As for types of mortgages, long-term fixes are the order of the day: "Most buyers fix for 10 or 20 years; rates of 4.9 per cent are available on 20-year deals. There are variable-rate deals but these have no guarantees so it can be difficult to budget mortgage repayments long term."
As for leaseback deals, Mr Ellis has a word of warning: "Some banks have stopped lending on these, but those that remain are doing due diligence to ensure guaranteed rents are backed up by a strong management company and that the build quality is good." Generally, banks insist borrowers spend no more than 35 per cent of net income on loan and mortgage repayments.
In France, as soon as you have agreed to buy, you sign a legally binding preliminary sales contract, the compromis de vente. At this point, you usually pay a deposit of 10 per cent.
After gathering all the paperwork together, which includes searches and reports on energy efficiency, a lawyer – called the notaire – draws up the final contract, the acte de vente. The vendor and buyer usually go in person to sign this.
Fees tend to be more expensive in France than in Britain. Stamp duty on properties built less than five years ago is 2.5 per cent. On older properties it can be much higher, in the region of 5 to 10 per cent. French banks also insist on a mortgage registration fee of between 1 and 2 per cent.
But settling in France isn't just a case of buying a home and relocating, warns Mr Ellis: "There are lots of things to consider if you're planning to become a French resident: what is your inheritance tax position? Will you be paying tax in France on your UK investments? And what you will do if you need to return to the UK?"
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
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