As the UK property market continues to push higher, there is no doubt that a shortage of affordable property is having an impact on prices. This has been the situation for many decades now in the UK with claims that governments over the years have manipulated new property builds to ensure there is demand for existing property, pushing prices higher and higher. As more elderly couples look to release equity from their property in a tax efficient and helpful manner, perhaps the UK government should look at the French system which allows people to buy property from elderly couples in a manner which is very different from the traditional property market.
The potential release of capital for elderly couples in their later years could offer a double whammy with a potential increase in spending, less pressure on house prices and security for those looking to climb aboard the property ladder.
How does the French system work?
The system we refer to in France is known as the “en viager” system which effectively allows you to make a large upfront payment when acquiring property from an elderly couple and then pay “rent” on the property while the previous owners remain. The initial large upfront payment is known as a “bouquet” and the monthly rent is an interesting angle because this can literally go on for months or years depending upon how long those on the other side of the property deal live.
Quote from PropertyForum.com : “Hello, I’m new to this site and would love some information on different regions in France. We have owned a holiday home in the Langeudoc for over five years now and are hoping to sell this and buy something further up so that we can drive down with our dog.”
Whether or not this is something that the UK government would ever consider remains to be seen because the French have a very different view on property ownership with the vast majority more than happy to rent. Under the French system it is possible to grab yourself a bargain depending upon the lifespan of the sitting tenants or you may end up paying rent for a property you can’t live in for many years. It is different, it is risky but many people in France see it as something to consider in areas where perhaps property is much sought after – it allows them to put down a marker for the future.
Due to the massive increase in property prices across the UK over the last 50 years or so, an array of elderly couples will be sitting on property goldmines for which they paid a pittance in years gone by. Nobody has quite yet mastered a system which allows them to get the best value for money, remain in the property in their later years but also give potential buyers a good deal.
We have seen an array of equity release companies appear over the years and while many of these are reputable and trustworthy, the industry has been soured by unscrupulous business people who’ve often acted outside of the “best practice” codes. The UK government may at some stage look to reshape and remodel this particular area of the market because as property becomes scarce for first-time buyers, prices are moving higher which is forcing many into the rental market. In what quickly becomes a self-fulfilling prophecy, additional demand for rented property yet again pushes property prices higher and further out of the reach of first-time buyers. A vicious circle?