French Real Estate: A Good Time to Invest
By Joris Cataldi and Professor Robert Anthony, Anthony & Cie
When purchasing a property there are several issues that one needs to consider. Tax, future growth as well as rental income. The speculation in European property markets created a volatility into market sectors creating difficulties into choosing safe investments in stable areas. Funds invested heavily into logistics as well as residential blocks of flats. The later they tried to create positive gains by selling the apartments individually. Certain streets around Europe were redeveloped to build more high class shopping.
France with the election of Macron has been targeted as an interesting place to invest into. Hotels have been targeted in Paris especially 4 and 5 stars. However the smaller boutique hotels have not been snapped up by the large groups so there are still opportunities to acquire these. In addition there are outlets available as well as shopping outlet in the Provinces if one has the contacts to source them. Generally these are off market and not found through the large estate agent firms. However to acquire the assets one has to understand that buyers commission will often be requested as a finder’s fee. This is more expensive than in Germany or the UK and is normally around 3 to 5 percent before any sales taxes. Like anywhere it is important to verify the liquidity of the market where one identifies an opportunity. Obviously the main towns like Paris are attractive.
Politics and taxes
Since Macron became president of France it has stabilized and encouraged investors. He has tried to reduce and liberalise taxes and amended certain aspects of wealth taxes. The bad news is it has been retained for property ownership excluding business operating premises. There are certain exemptions on minority ownership and public companies and these aspects can been advised on should there be questions relating to wealth taxes.
France has however become attractive to international investment funds and has become a serious target.
Investing in the real estate is undeniably a safe haven ... it is still necessary to be well accompanied to make the right choices!
In view of the general hardening in terms of international taxation, France has today become a country where real estate investment is profitable.
It is tax professionals and banks who play a key role in investments made by non-residents.
Mortgage interest rates have reached historically low values. With a practice of interest rates at 1.29%, on average, in July 2019, for credits over 25 years or more, it is an encouragement as well as an incentive for investment. Credits being contracted for less than 20 years reach rates below 1% and considerably increase the rate of return on investments made.
In addition, by the objective of the French banks, and by the monetary policy of the European Central Bank, the acceptance of the credits is more and more facilitated in order to reach their objective of dynamisation of the real estate market in France. Banks agree to practice more and longer credits, 19 years on average.
This fall in rates had not been met for several years and that is why the price of real estate in France has not yet increased in proportion to the decline in these rates.
The investment in the real estate remains a safe and interesting investment ... provided that it has defined its objectives and clearly study all the parameters.
Remember that rental investment is risky and the benefits must be greater than risk-free investments.
If the idea is to obtain a high rate of return, it is important to know that, at present, the potential returns are very different from one region to another, and from one city to another. Today, the net profitability of a real estate investment varies most often from 2.5% to 7%.
Location of property is THE important criteria in real estate investing.
It's summer ! the opportunity to question arise when it comes to the second homes in France. Where are they? In which city to invest in real estate ? According to a study by INSEE, based on 2015 data, second homes account for 10% of the housing stock.
The coastal departments are the most popular as are the ski resorts
In its report, the INSEE tells us that the rate of secondary residences by department (proportion of second homes compared to the number of dwellings) is highest for the following departments: Hautes-Alpes (45.14%), Corse-du-Sud (39.38%), Savoie (37.32%), Haute-Corse (35.32%), Lozère (32.41%), Alpes-de-Haute-Provence (31.63%) ), Pyrenees-Orientales (28.69%), Var (25.54%), Aude (25.49%), Ariège (24.75%).
Paris, the city with the most second homes, followed by Agde and Cannes
Among the top 20 cities in number of second homes, we find Paris, Agde, Cannes, followed by Nice, Antibes, Le Grau-du-Roi, Fréjus, Saint-Raphaël, La Grande-Motte, Leucate, Le Barcarès, La Baule -Escoublac, Marseille, Menton, Belleville, Les Sables-d'Olonne, Lyon, Saint-Cyprien, Saint-Hilaire-de-Riez, Arcachon.
Succeeding in a real estate investment always means choosing a good address, which essentially translates into the image of the neighborhood, its services in transport and its collective facilities (kinder garden, schools, sports halls, green spaces ...). Choose your property as if you were going to live there yourself.
A good address ensures the valuation of your home in the long term: it absorbs the shock of a possible reversal of the real estate market, allow you to easily find a tenant and resell your property faster.
The state of the rental market must guide you. Is there a real demand? What are the accommodations offered? Who are the tenants (students, families)? Check that there have not been too many new programs built in one place. Housing supply must not exceed demand. Opt for an attractive city with many economic and urban development projects. It will attract assets, which are future buyers or potential tenants.
Beyond you want to invest, the way in which the investment is to be made is also one of the most important elements of your project.
With a network such as that of GGI and that of FNAIM, as well as 40 years of expertise in this field, it is with pleasure that the whole team of Anthony & Cie is at your disposal to accompany you in all of your real estate projects in order to carry out your project, your dream for you and your client.
Professor Robert AnthonyAnthony & Cie, Valbonne, Sophia Antipolis, France
T: +33 4 93 65 32 23
Anthony & Cie is an independent, international family office, based on the French Riviera as well as located in Paris and in London. Since its creation in 1978, Anthony & Cie orchestrates financial, real estate, and tax advice, as well as French legal advice.
Professor Robert Anthony is the founder and principal partner of Anthony & Cie. He is a professor of international tax law (Thomas Jefferson School of Law, California). He is a chartered certified accountant (UK) and certified financial planner (France).
Joris CataldiAnthony & Cie, Valbonne, Sophia Antipolis, France
T: +33 4 93 65 32 23
Joris Cataldi has been working as a wealth manager for Anthony & Cie for the last two years. He oversees the legal formalities and insurance department. Joris received his MA in asset management/finance in 2019. He previously worked for three years in the insurance sector.
Published: Real Estate Newsletter, No. 10, Autumn 2019 l Photo: Uwe Rieder