When Macron took over as France’s president in May 2017, Paris certainly got a spring back in its step. But what impact has it had on the property market? “As the first openly neo-liberal president in a long time, Macron’s election has been a big boost for France’s property market, especially given the current uncertainty over Brexit with regard to the UK,” explains Lucile Savattier, Athena’s Paris Destination Adviser working out of our offices on rue du Faubourg Saint-Honoré. “We have noticed a big jump in clients looking for properties for sale in Paris over the 2 million mark and Paris’s price per square metre has hit a new record.”
So what underpins the demand?
Try record-low mortgage rates, a highly liquid market and loan-to-value ratios of up to 85%.
“There’s the impression that people have of investing in France that it’s still a high tax environment, due to lots of lovely Daily Mail articles,” shares John Busby from French Private Finance. “Contrary to tabloid opinion, for premium property buyers, France is actually a very low tax environment. Investing in France can bring great long-term returns, especially if you know how to set your investment up.”
So what do you need to know about making your money work wisely in France? John Busby shares his top 5 insider tips for navigating the French mortgage market.
Best value in Paris
Of all France’s property markets, Paris is the place for the lowest fixed rates for mortgages. Paris is such a liquid market that to secure a property, you will often need to sign a promise of purchase before your mortgage has been secured. This is a strong indication of the market liquidity and, as a result, the banks are confident and reduce their fixed mortgage rates. Expect to find rates as low as 1.75% pa in comparison to the national average of 2.15%.
Fix your rate for 20 years
In the UK, mortgage rates tend to be fixed for between 2 and 5 years. In France, you can fix your rate for 20 years, which in the current climate of instability, provides a welcome constant for many of our clients.
Register your property properly
If investing in a property of over €1 million, you can apply to register it within a structure known as a SARL de Famille (Société à Responsabilité Limitée) a form of private company, which grants the buyer or buyers company status in the tax-man’s eyes. This gives you access to long-term, low-rate fixed mortgages and means that the property is more tax-efficient. All expenses related to the property can be offset, so there is little or no tax to pay on any rental income over the 20 year period, meaning that financially your property can maintain itself and bring you higher income.
Stick to euros
Taking a mortgage in Euros is the safest course of action given potential exchange rate differences and fluctuations in the market.
Should you decide to pay back your property loan early, French banks will only charge a 1% penalty of the loan, in comparison with a 5-20% penalty imposed by British banks. This can represent significant savings.