How to buy a luxury property in France – Part 1: Getting Started

In a study conducted in 2011 we estimated that on average every year in France between 12,000 and 15,0o0 luxury properties are sold (costing more than €1 million or more than €10,000 per square meter) which represent approximately 2% of total property transactions, more than one third of which are executed in Paris. Yet the total number of luxury transactions has recently decreased due to the current economic situation and the increase in local property taxes; during 2012, the trade volume in the French capital has been subject to a significant drop (-20%) while property prices have not changed much, according to data published by the chamber of notaries.

Photo credit: Architectural Digest

Excluding Paris, in many of the most prestigious locations, French buyers account for less than 20% of all purchases. Therefore this niche market is primarily driven by the international appeal of many French locations, such as the French Riviera, Provence, mountain resorts of the likes of Megeve, Courchevel, Chamonix or Val d’Isere, medieval towns (Annecy, Carcassonne, Aigues-Mortes, Puy-l’Évêque, Gordes and many others…) and the imposing private castles of the backcountry (in the pays de la Loire such us in the surroundings of Touraine, Angers, the most renowned).

Whatever the nationality of the buyer, the process of buying luxury property in France can be long and drawn-out, with some potential pitfalls along the way. It is important not to ignore the preliminary activities or the necessary red-tape if you want to avoid financial and legal surprises. With a series of articles we will accompany you step-by-step through the process of buying a luxury property in France and will explain and advise on how to successfully complete your property transaction.

First and foremost, it is important to define your needs, your preferences and your budget. Below you will find some of the factors that you should bear in mind during the first step of the property buying process.

1. Things to think about before you start your search

We advise you to write down your specific search criteria so that you can refer to your requirements as you consider various properties and select only the ones which best match your current and future demands. This will help to avoid impulsively choosing the first property that you come across.

The location is probably the most obvious and important characteristic of any property; here is a list of other things to take into consideration:

• Think about how large the property needs to be: number of rooms, storage space, a cellar etc. Try not to only think about your immediate requirements but also your future plans to make sure that you will still be happy with your purchase in the years to come.
• The view, brightness (and position of the property with regards to sunlight) and noisiness are important factors that influence the comfort and the price of a luxury property.
• The style of architecture, both inside and outside. If you are looking for an apartment, which floors do you prefer? Do you need a lift?
• Extra facilities such as garages, swimming pool, gym, access to a private beach or the ski slopes and so on.
• Proximity to cultural attractions or exclusive amenities such as a golf club or a private harbour.
• Accessibility and distance, using the preferred transportation.

Define your budget

At the beginning of your search it is advisable to define a price range and a maximum budget that you won’t exceed, which will be very useful during the negotiation with the vendor. You can verify average property prices (these are asking prices) on all the main property portals to understand if you budget is in line with your expectations. However in case you are looking for a unique property, chances are that you will not be able to find relevant comparable properties and therefore this initial check will have to be postponed.

Remember that on top of the property price which includes the agency’s fees you will be required to pay all the other ancillary expenses such as property taxes, notary’s fees, surveys, any reworks and relocation expenses and, if needed, mortgage expenses. (see our blog post about all costs to buy a property in France here)

2. The search process

Although most property buyers start their search online for privacy and security reasons many luxury properties won’t be advertised on the internet by the real estate agencies or their private owners (sales private to private account for a significant market share in France). In 2013 Te Atrium will launch a private platform entirely dedicated to off-market transactions, viewable only by registered users; register on our site to be the first one to know.

Alternatively to selling agencies it may be worth taking in consideration buying agents, who act solely on behalf of buyers and on top of the property search they can help during all the other phases of the acquisition process. Some buying agents do not charge the buyer because they share the overall commission with the selling agent while others, for various reasons (type of market, type of property, independence from selling agents) request a separate compensation which generally varies between 1% and 2% of the house price.

One of the significant features of the French property market is the practice of ‘inter-agence’(inter-agency), which is when two or more agencies agree to work together, sharing mandates and transaction profits. In addition it is common that the same property is sold through several different estate agents. For these reasons contacting a limited set of agencies the client can access a wide choice of properties.

Photo Credit: Architectural Digest

3. Buy new or buy old ?

A property is considered ‘neuf’ (new) if its date of completion is in the future or if it is resold by its first owner within 5 years of being built. A new property does not usually require any substantial work for 10-20 years but before purchasing you should obtain the assurance that the developers will complete all promised amenities (cellar, garage etc), that the structure will be in accordance with legal requirements and that the property has been properly insulated. Furthermore, you can also rely on the ‘garantie décennale’ (ten-year guarantee) which covers any construction defects that may be uncovered in the first ten years after a property is built. Older or ‘ancien’ properties, on the other hand, will usually have higher running costs, particularly for maintenance and renovation.

New properties are also more advantageous in terms of taxes and financing costs. You can benefit from zero-interest loans and can also expect lower additional expenses relating to the sale: for new properties acquisition costs total about 2-4% of the purchase price while for older properties this is more like 7-8%.

Given the scarcity of new luxury residential constructions in France one of the downsides of buying a ‘neuf’, consists of a purchase price which is usually 20-30% higher than older properties. As an investment it may carry a lower yield as tenants are not willing to pay such a big premium for the same real estate.

For more information on the French property market and advice from industry experts on how to buy the property of your dreams, regularly check our blog (subscribe here). If you are looking for an exclusive home and/or feel like sharing your experience in relation to the purchase of a luxury house we kindly invite you to use the comment section of the blog or search for properties on our main site.

UPDATE : This aritcle was originally posted in June 2012 and was updated on December 18th 2012.

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