In 2011 between 7,000 and 8,0o0 properties costing more than €1 million were sold on French territory, the luxury market represents approximately 1% of property transactions in France (study by Xerfi) and it is also worth noting that only 20% of these purchases were by French buyers. Therefore this niche market is primarily driven by France’s appeal, in particular Paris and the French Riviera, to international buyers and the fact that, unlike in some other countries, there are no restrictions on foreigners owning real estate.
Whatever the nationality of the buyer, the process of buying 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.
The French market displays a rather low rate of property ownership at just 56%, in addition no less that 50% of property transactions take place between individuals. In recent years the internet has become an indispensible tool for property searches and 80% of buyers start their search for a home online.
Our guide will accompany you step-by-step through the property process of buying a luxury property in both Paris and the Côte d’Azur, although the information given can also be applied to France in general, and will explain and advise 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 the factors that you may want to consider during the first step of the property buying process.
Photo credit: Architectural Digest
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.
Here is a list of 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.
- The style of architecture, both inside and out. If you are looking for an apartment, decide which floor you would be happy with in the event that the building does not have a lift.
- Extra facilities such as garages, swimming pool, gym and so on.
Define your budget
In order to define your budget, you may want to take into account your prospect income, expenses, loans, taxes and any regular outgoings especially if you are relying on your income to pay for part of the running costs. If you require a mortgage, be aware that banks generally only grant credit if the debt ratio (including any outstanding loans) does not exceed 30-33% of your income, however there may be exceptions to this rule for those with high incomes.
It is also necessary to take into account the costs associated with buying a property before you launch yourself into a purchase. There are not only notary fees, credit charges, moving costs and agency fees but also property tax, council tax, extra charges if you are buying property in shared buildings etc
2. The search process
Nowadays it is estimated that the majority of people looking for luxury property will use the internet. Although there are a number of properties published on websites, it is worth remembering that for privacy and security reasons a luxury agency is probably authorized to display only half of its portfolio on the internet.
You can find a number of niche agencies which specialise in luxury properties although remember that there are also other agencies which cover a wider range of properties. 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. For this and other reasons it is therefore common that the same property will be for sale through several different estate agents. Contacting more than one agency is always a good idea and the client can benefit from a wide choice of properties from just a few agents.
Take a look at our online property listings at Te Atrium.
Later in 2012 Te Atrium will launch a platform entirely dedicated to private negotiations. Register on our site to find out when it’s online.
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%. In addition, for new properties VAT is already included in the asking price and transfer fees are also lower, about 2-3% as opposed to 6-7% for properties classed as ‘ancien’.
Given the scarcity of new luxury residential constructions in France, one of the downsides of buying a ‘neuf’, is the 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 and consequently rental yield tends to be lower.
One last thing to remember is that because there are fewer new properties on the market (especially in Paris and the Côte d’Azur where new developments are rare) it is very difficult to select a specific neighbourhood or location.
For more information on the French property market and advice from industry experts on how to buy the property of your dreams, see our recent post on How to buy a luxury villa on the Côte d’Azur and look out for our upcoming post on buying property in Paris.
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