10 Facts To Know When Buying A Property In France
How to Buy Property in France
France is beautiful nation with a rich variety of land, from its stunning coastline on the Mediterranean and Atlantic to its spectacular mountain scenery in the Alps, Pyrenees and Massif Central. It is is the second most popular destination with Britons buying property abroad; approximately 200,000 Britons have bought a piece of the neighboring country, with reportedly several thousand more moving across the Channel annually. The buying and legal process, while different to that in the UK, is far from insurmountable - it simply takes a little more patience and a small leap of faith to reap the enormous rewards.
Consider why purchasing property in France is a good idea.
- Good lifestyle: The French have a strong appreciation of the good things in life, and are considered to be amongst the most cultured of people. Good food and fine wine are held to be their right, and a relaxed pace that affords them time to enjoy such fruits of life fully is sacrosanct.
- Price: The price of experiencing life in a more measured and relaxed manner is cheaper than in the UK, but not as inexpensive as it was a decade ago. France has seen average property price increases of 80 per cent since 1997, and prices in some areas continue to appreciate by approximately 10 per cent annually.
Be realistic.The possibility of getting a stone house - the very epitome of France - in a rural location, overlooking sun-kissed hills, for £30,000 is remote. Increased interest in lifestyle properties overseas from UK buyers, as well as more competition from French people looking for a rural retreat make the dream gem of a property to renovate in the countryside harder to find. This is not to say these properties no longer exist, but you will have to search harder to find them. It may well require an additional £70,000 of work to make it habitable, but £100,000 for your very own piece of the good life doesn't seem an awful lot to pay, does it?
Consider the popular property locations in France.France, of all nations, really does have the lot: cultured cities, great beaches, awe-inspiring mountains, rolling hills and meandering rivers. Broadly speaking, the northwest regions of Brittany and Normandy are remote, with rocky bluffs and windswept beaches, while the Cote d'Azur, on the Mediterranean south coast, is incredibly beautiful, with golden sand beaches, ritzy restaurants and million-pound marinas. Most of France lies between the two geographical and cultural extremes.
- Paris - Paris is the capital and pacesetter for the rest of the country. France's significant business is conducted here, its government and political powerbrokers residing in the northern city. Culturally, Paris is home to several museums, opera houses and galleries, and countless cinemas and theatres. Much as in any major city, property prices in central areas are expensive. One would be hard-pressed to find a studio priced at less than 200,000 euros (£156,000), but 30 minutes from the city centre by train, for example, 100,000 euros (£78,000) buys a one-bedroom apartment out in the suburbs close to Disneyland Paris.
- Central and southwest France - Heading south, the Loire, known for its vineyards, chateaux and rivers, is a land where time seems to have stood still for a couple of centuries where the latest hot spot for French property, Limousin, can be found. Still further south is the Dordogne, in southwest France. Given the nickname Little Britain locally, the region is picture-postcard pretty, chock-full of butterscotch-coloured stone cottages and green hills and dales.
- Property in the Loire can be bought for 170,000 euros (£132,000) for a two-bedroom house in good repair. A character period house costs from 400,000 euros (£311,000), depending on condition. In the Dordogne, a picturesque three-bedroom cottage in a pretty village costs around 500,000 euros (£389,000).
- The south coast of France - Travelling eastwards towards Italy, bypassing the cosmopolitan cities of Montpellièr and Marseille, one comes to the shimmering Cote d'Azur and inland Provence. For many people an idealised France, the region is the height of sophisticated living, be it dining in a quayside restaurant, or sipping a glass of wine in a hilltop cafe overlooking the sparkling blue Mediterranean.
- It would not be unusual to pay 1 million euros (£778,000) or more for a villa located inland with views, and considerably more for one close to the sea and with sea views. That said, a one-bedroom apartment in the centre of Nice, for example, can be picked up for 150,000 euros (£117,000).
Buy your property in France.France's legal system is very different from the British one, and it is essential to use the services of an independent, English-speaking solicitor. The notary (notaire) is a mandatory part of the purchase process. Do not be fooled into thinking that the notary will look after your legal interests, because he won't. The notary is a government official and works for the state, not the buyer or the vendor, although, confusingly, notaries often act as estate agents as well.
- Once a sale has been negotiated, an initial legal contract, the compromise de vente, is prepared by the notary and signed by both parties. On signing, the buyer pays a 10 per cent deposit, with the balance due on completion. By law, there is then a seven-day cooling-off period, during which the buyer may withdraw from the purchase if he wishes.
- There follows a period of generally 10-12 weeks in which the searches are carried out. At the end of this period, the final contract, the acte de vente, is signed in front of the notary, and the property passes to the purchaser. The various fees and taxes, including transfer tax and the notary's fees, become due for payment at this point, after which the deed of sale is registered at the Land Registry.
Be prepared to meet the essential costs.Several fees and taxes are payable when buying property. Budget to pay 9-13 per cent of the purchase price, excluding a buying fee, payable to the estate agent, which may be applicable in some cases - ask before you proceed. Costs may include:
- Transfer fees: 6-7.5 per cent (less for a new build property)
- Notary fees: 1-1.5 per cent
- Legal fees: 1-1.5 per cent (for the appointment of a solicitor)
- Property registration fee: 0.6 per cent for properties less than five years old, 1 per cent for others
- Surveyor's fee (optional)
- Mortgage fees (if applicable)
- Foreign exchange costs (if applicable)
- Estate agent's fees of up to 10 per cent may be applicable when buying
- Finally, don't forget that there will be costs for registration, VAT, land registry and stamp duty
Consider the available mortgages.As in the UK, it is commonplace in France to use a loan (mortgage) to purchase a property. Should this be your choice, your should declare to the solicitor that you intend to do so, in order that it may be written into the preliminary contract. Thereafter, should you be unable to secure a mortgage, for whatever reason, the preliminary contract would be cancelled and your deposit forfeited. Loan levels of up to 80 per cent of the property value are generally permissible, leaving the buyer to raise a 20 per cent deposit.
- Securing finance these days is a relatively straightforward process, given that the buyer has an income and/or owns a property in the UK. Should you be a homeowner, you have the choice to take out a first (or second) mortgage against a UK property to raise the capital to buy the property in France outright. Alternatively, you may elect to take out a mortgage against the French property, in which case your income would be the primary determining factor as to whether a loan would be granted. In most cases, rental income is not taken into account when deciding on a person's ability to repay a loan.
- Euro mortgages - It is increasingly common to take out a mortgage on a property in France in euros rather than sterling, essentially because it is cheaper to do so, since euro mortgages are tied to the rate set by the European Central Bank (ECB), which is currently lower than the Bank of England base rate. This option is particularly attractive for owners who receive income in euros, for example rental income, as well as making the mortgage repayments in euros - effectively negating the need to transfer sterling to a French bank account (at a cost) to cover the mortgage repayments. Should an owner choose not to let his property, he may well find that the monthly cost of currency exchange and transfer from sterling to euros to pay the mortgage counteracts any saving made by the lower euro mortgage rate.
Be aware of taxation:France & UK. A double taxation agreement exists between France and the UK. Therefore, tax is paid in one or other country, not both. Seek specialist financial and tax advice on all matters relating to personal and property purchase transactions.
- Income tax - Non-residents may be subject to income tax (impet sur le revenu) on money earned in France, for example from letting a property. The rate for 2006 is 20 per cent. For tax purposes, a foreign national staying in France for more than 183 days during a calendar year is considered a resident. The 183 days need not be consecutive.
- French residents are taxed in France if their main income arises in the country, their principal activity is in France, or if France is the country where most of their substantial assets reside. As at 2006, annual income of less than 5,515 euros (approximately £3,748)) is not taxable. Income of 5,516 euros (approximately £3,749) to 65,559 euros (approximately £44,544) is taxed in bands of from 5.5 to 30 per cent. Above £44,545, 40 per cent is payable.
- A mechanism known as "parts familiales" reduces the tax burden. Under this system, the household's combined taxable income is divided by the number of units (parts). A spouse, dependent children or others are considered to be parts. For example, a husband and wife are classified as two parts, effectively meaning that their joint income is aggregated and then divided by two to reach a joint taxable income that is then taxed at the applicable rate.
- Other personal taxation - Both residents and non-residents may be liable for capital gains tax (CGT) if they dispose of assets (including property) at a profit. Regardless of residential status, a property owned for 15 years or more is exempt from CGT. Prior to the full term, after five years' ownership the net gain is reduced by 10 per cent per annum for each subsequent completed year of ownership. Otherwise, CGT is charged at 16 per cent. Residents additionally pay an 11 per cent 'social charge' and eight per cent 'healthcare charge' if not exempt.
- Both residents and non-residents may be also be liable for a wealth tax on assets (including property) above the value of 750,000 euros (approximately £583,000). The tax rate commences at 0.55 per cent, rising to 1.80 per cent on assets above 15,530,000 euros (approximately £12,075,266). Inheritance tax may also apply to both residents and non-residents.
- Local taxes - Two local property taxes are applicable: taxe fonciere and taxe d'habitation. Collected centrally, the revenues are distributed regionally and to local administrative districts (communes) to pay for services including refuse collection, street cleaning, schools and other community facilities, as well as the administration of these services.
- These taxes apply regardless of whether an owner is a resident or not, or whether the property is a permanent or holiday home. Taxe fonciere is payable by the owner and taxe d'habitation by the occupier (for example, the tenant if the property is let). Should the occupier not pay, the owner is liable.
- The taxable rates are determined by the "collectivité territoriale", the local authority of the region, department and commune, which receives the benefit. Tax amounts vary from region to region, sometimes quite substantially. Of the two, taxe fonciere is the more expensive and can be so by as much as twice the amount of the tax d'habitation.
Prepare the passports, visas and residency.
- Passports and visas - British citizens in possession of a valid passport may visit France for up to 90 days. A visa is not required. By law, everyone in France is required to carry ID. Visitors should, therefore, carry a valid passport at all times to produce on request.
- Residency - British citizens, as members of an EU country, are entitled to live and work in France and do not require a work permit or visa. A formal residency document, known as a carte de sejour, is no longer compulsory, but it may be useful as a form of identification.
Understand the French economy.France is a country in flux. Its centralised economy of the last five decades has left it at odds with its Western European neighbours, propelling its government to partially or fully privatize many large companies, banks and insurers in its attempt to ensure it remains competitive within the EU and global markets. France has a tax burden that remains one of the heaviest in Europe (nearly 50 per cent of GDP in 2005), the general global economic slowdown has helped push its budget deficit above the Eurozone's three percent-of-GDP limit, and unemployment stands at 10 per cent in a country that has seen great social unrest of late.
Seek out other Britons who have bought in the region, town or village that interests you.Try to learn, and speak, a little of the language. Then, and only then, will you be able truly to enjoy la belle France.
QuestionFor a USA citizen, is French residency a problem if one buys a home?wikiHow ContributorCommunity AnswerIf it is a vacation home, it's not a problem, but if it's a permanent residence, you need to get legal residency.Thanks!
QuestionI am planning on purchasing French property from another American citizen. Do we have to do the transaction in France, or can it be done from America?wikiHow ContributorCommunity AnswerThe transaction can be done wherever you like, as you don't have to involve the government in any way.Thanks!
QuestionCan I sell a French property to an English person, dealing in sterling?wikiHow ContributorCommunity AnswerOf course you can. As long as it is your property, you can accept any form of payment.Thanks!
Is it acceptable to make an offer on a french property below the asking price?
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