Published on 31 October 2006 at 10:03 am
Filed under: Europe:- France Property Guides » France Investment Property Potential Guide
So keen are the French government to attract foreign investment into the property market that they recently halved the amount of capital gains tax payable on the realisation of profit from the resale of property and they invented the French leaseback scheme that allows buyers to own outright freehold property in France, purchasing it at a discount to market value and generating a guaranteed return from it whilst retaining the right to occasional personal use of the property.
Naturally enough these factors mean that the investment property market in France is ripe for exploration.
Buyers who want to tap into the leaseback scheme have to be aware that properties available for sale within the scheme are in limited supply and so they should register their interest with various agents and developers of such properties and wait for real estate to come to the market.
The way the leaseback scheme works in a nutshell is as follows: -
The scheme, known as Résidence de Tourisme in French, is unique to France. An investor buys the freehold rights to a specific property with or without a mortgage and then they lease it back to the developer or a letting agency affiliated with the development for between nine and eleven years for a fixed rental rate which is usually between 3 and 7% and which often covers any mortgage commitments.
At the end of the period the property is returned to the owner in perfect condition and during the fixed rental period the owner usually has the right to use the property for no charge for up to six weeks a year. Such properties are sold to investors without the addition of 19.6% VAT and they are hugely popular with investors seeking a low risk entry into the overseas property market.
Many other alternatives for property investment exist in France however, and so an investor should explore their options before committing.
The tourism market is big enough and strong enough to sustain a great deal of investment countrywide. The best locations for yields and occupancy rates are along the Southern coastline but naturally enough these locations are also the most costly too. Viable alternatives exist in the form of detached villas with pools across the country, especially in historic, interesting, exciting and highly accessible areas.
Paris has an active rental market with the best located properties achieving strong monthly rents and there is an increase in demand for corporate lets and serviced apartments that offer an investor a hands off, high end opportunity in Paris and other major economic cities in France.
There is local as well as international demand for rental and resale property, international mortgage lenders such as Barclays Bank actively lend on properties in France making it easy for people to raise finance to purchase property and all this means that the market is dynamic…but an investor must be aware of the fact that the buying process is lengthy, drawn out and complicated by red tape and that this can then of course affect the resale of any investment he makes in terms of the speed at which gains can be realised.
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