France is a country which is very much a central part of Europe because as well as being the most popular European tourist destination it also has a very varied property market which has and continues to attract the attention of many international investors. However, in the current economic climate is it logical to invest in France or should investors remain on the sidelines for the time being?
This particular subject is raised on a thread in the Property Community Forum entitled “Logical investment in France” and has been started by someone with an obvious vested interest in the French property market although at the same time offering a number of interesting facts and figures.
The original poster is suggesting that capital deposits of under £4000 will get you on the French property ladder, guaranteed rents of 4.5% are available, possible cash back options are there to consider, and all Notary fees may be waived. It would appear there is also the potential for 100% finance options although it is uncertain whether these are from French banks of property developers themselves. The above figures may well prove attractive to many international property investors but what other factors do you need to take into account? What would make you invest in France?
The French leaseback and buy to let market
The Property Community Forum has on a number of occasions covered the subject of French leaseback and buy to let options in the property market. While on the surface these would be appear very interesting options for long-term investors there are a number of factors to consider which may slightly tarnish the shine of these particular options.
Many people have found great difficulty in not only selling on leaseback or buy to let properties but also potential problems with tenants when these agreements are up for renewal. The courts in France tend to err on the side of the tenant rather than the landlord and this has caused substantial difficulties for many people in the past. That is not to say that all leaseback and buy to let transactions are potentially tricky, just that investors need to go in with their eyes open.
As covered on the thread, the leaseback and buy to let markets in France are notoriously closely linked to a variety of tax incentives introduced by the French government. As you would expect from a potentially tax efficient investment, the greater returns are available at the end of any such agreement although there is concern that these tax incentives may not last forever.
A contributor to the forum has already highlighted the fact that similar schemes in France have seen their tax efficient angles taken away by the authorities and there is no firm commitment to any potential tax incentive for property investors. While the authorities would be unlikely to remove such incentives in the short term, bearing in mind the ongoing economic downturn, that is not to say that the long-term situation will remain unchanged.
While any potential tax incentives or government assistance should obviously be taken into account when looking at a potential property investment, it is worthwhile remembering that many of these various incentives come and go depending upon the state of the market. It is easy to forget that there is a cost to each of these incentives and the authorities will expect a significant return on investment in the long-term.
Looking to invest in France?
There are some very interesting comments on thread and one in particular mentions the very popular investor Ben Graham who was very eager to get the message across that any investment should be considered on a long-term basis. Taking a short-term and medium-term profit is fine if it is available but those seeking such short-term returns are very often putting their investment funds at undue risk.
The emergence of various property hotspots around the world and the substantial publicity that they can attract would appear to have changed the mindset of many international property investors from that of a long-term commitment to more short and medium term profit taking. Whether this is the correct way to operate remains to be seen as each and every investor has a different profile, different return requirements and different risk factors.
While concentrating on the French property market, for those looking to invest in France there is no doubt that there is substantial potential for growth in the years ahead after a significant fall in French property prices across the board. One of the main attractions of the country is the fact that it offers such a wide range of properties including anything from the ski resorts which are very popular with tourists to the countryside residences which offer a quiet and relaxed backdrop for many people. The country has for some time been very popular with UK investors, as the potential to commute to the UK on a regular basis in a very short space of time has great attractions for many.
Is now the time to invest in France?
There are many variables to consider when looking at the French property market, after the recent downturn, which include your specific investment profile, time span of your investment and the style and type of the property you are looking for. We may well look back on the current situation in 20 years time and kick ourselves for not taking advantage of the substantial fall in property prices in one of the world’s most popular tourist destinations, but at this moment in time many investors minds are clouded with the threat of an ongoing recession.
For those a little more open-minded it is worth remembering that you will never catch the bottom of the market, just like you will never catch the top of the market, but if on a long-term basis you believe property in France offers potential for future growth then now may be the time to consider what is on offer.
Many people forget that France is one of the most popular tourist destinations in the world and this is unlikely to change in the short to medium term. The country has attractions for many international property investors and while UK investors are often prominent in the marketplace many European counterparts have also taken a great interest in the country.
There are many property markets around the world which you could pinpoint as offering substantial potential for growth in the future but France appears to be one which has a substantial backbone to fall back on. Tourism is a vital element of any property market and there are few countries which can compete on the same level as France in attracting overseas visitors. So it is not hard to see why many people are looking to invest in France?