In common with other European countries, 2012 has been a tough year for the French property market with a falling number of sales and lower prices. Our Chief Executive, Trevor Leggett, has been quoted in the press as saying:

“Overall we expect there to be around 650,000 properties sold in France this year. This is lower than in 2010 & 2011 but still well above the 594,000 sold in 2009.

Both the FNAIM and the Notaires de France are now reporting that prices across France will have fallen between 1-2% in 2012. Of course this “average price” statistic is fairly meaningless as France is made up of hundreds of smaller “micro-markets” some of which will weather the storm better than others.

The key to 2013 will be the attitude of vendors and agents towards pricing – if they are sensible and understand that prices have fallen in line with overall consumer confidence then we see no reason for transaction numbers not to remain similar in 2013. However, if vendors and agents don’t price sensibly then volumes could drop again, it’s still a buyers market and we all have to recognise this.
The latest figures from BNP Paribas showed that sales to international buyers had dropped off slightly but that these buyers had bigger budgets. We see this trend continuing and have certainly noticed a change in our buyer profile with more families looking to move to France. Families need larger properties and often have bigger budgets as they are less reliant on savings and the pension system – the BNP Paribas figures gave an average purchase price of €265,000 for international buyers and we wouldn’t be surprised to see this rise towards the €280,000 mark in 2013.

The Government has promised to “re-introduce fairness to the heart of the tax system” and this does have implications for international buyers. There was a short lived media frenzy after the announcement of plans to make international buyers pay social charges on rental income and capital gains but this doesn’t seem to have affected our sales this year – after all, if French residents are taxed in this way then surely it’s fair for overseas buyers to pay the tax as well.
It’s clear that France is not necessarily the most tax efficient home for entrepreneurs looking to make a fast buck. However, the fact remains that it is the most visited country on the planet and 79 million people a year (and rising) can’t be wrong. We have 37 UNESCO sites, some of the safest & prettiest beaches in the world and ski resorts to suit all needs. The best wines come from France and we have the food to go with them. In troubled times it pays to buy in established and prime areas and France can be considered just about the most prime country in the world.
We have two tips for 2013. The first is french farmland. The average value of agricultural land in the UK is currently £6,073 an acre or £15,182.50 per hectare. At an exchange rate of 1.24 euros to the pound that equates to over €18,800 per hectare. Compare this to agricultural land prices here in France. SAFER figures show that untenanted farmland cost an average of €5,430 per hectare last year – that’s almost one third of the price. The price of Englishfarmland has rocketed by more than 10,000% in the last 60 years and France certainly gives farmers a cheaper (and sunnier) option.

Our second tip is Alpine ski property. The Leggett ski team has seen a 300% increase in sales this year and mid-market buyers are back in the market for the first time in six years, with budgets of between €400-800,000. We see this trend as continuing with increasing demand from international buyers within this price range”.

New research from INSEE (National Institute of Statistics and Economic Studies) has generated much positive press coverage in SW France – indeed the Sud Ouest newspaper recently ran two headlines “La nouvelle promenade des Anglais” and “God save la Saintonge”.

The study shows that for the first time expat Britons now make up the highest number of “foreigners” in SW France. There are now 16,000 Britons in Aquitaine, a number that could be doubled if you add in the neighbouring departments of Gers, Charente and Charente Maritime. Also of interest is the fact that these are not necessarily the wealthy retirees that one associates with the heart of the Dordogne. The report shows that many of the new wave are younger families who are looking to work in France and forge strong roots in the community.

Trevor Leggett, Chief Executive of Leggett Immobilier, sees this as a welcome and healthy trend:

“I’m not surprised by the findings – our agents in SW France have seen sales rise by around a third over the last couple of years and many of these have been to young families who are moving to France to escape the rat race and to see their children grow up in a safe, sunny and peaceful environment. We currently have around 1,800 houses for sale in Aquitaine and 2,000 in neighbouring Poitou Charentes – many of these will be particularly attractive to UK buyers as they have plenty of land and are close to pretty villages and excellent schooling.

On the 16th August 2012 the French Assemblée National ratified
President Hollande’s new tax and financial proposals.

These have created much media interest and even talk of a French
property slump – Trevor Leggett, Chief Executive of Leggett
Immobilier, has the following comments:

“When he came into power, President Hollande vowed to raise state
spending by €20bn over his first five years, as an example you may
remember that he pledged to hire 60,000 new teachers.

France consistently tops the polls of having the “highest quality of
life in Europe” and unrivalled healthcare and education systems are
the bedrock of this quality. Indeed, this state spending is why our
lives here in France are so attractive and the reason that 40,000
overseas buyers bought a property here last year.

Most of the policies brought into place simply bring European owners
of property in France into line with current French residents.  Where
this is the case you could say that it’s probably long overdue.

For sure, the very top end of the market is going to see a hit with
wealthy individuals being directly targeted by the President but
overall I don’t think that the new regime will have a dramatic effect
on the general housing market.

Of much more importance will be whether agents and vendors bringing
houses onto the market decide to price their properties sensibly – if
they do then the market will continue to move.  However, if they are
greedy and they overprice to compensate for higher taxes then the
market could stall.  This would lead to a reduction in overall
transaction numbers and a resultant drop in market value”.

The two headline changes that were ratified by Parliament this month are:

Tax on “non resident” property owners

These apply from January 1st 2012.  Total tax liability on rental
income has increased by 15.5% up to 35.5%. However, for UK citizens,
some of these charges can be offset due to the France/UK double tax
treaty – it is essential to get professional advice to determine the
level of your individual exposure.

The tax on property gains has increased to 34.5% (from 19%) for EU
residents but deductions can be made for every year of ownership after
the first 5 years (years 6-17 give 2% reductions, years 18-24 give 4%
reductions and years 25-30 give 8% reductions).

French notaires have been told to deduct the tax directly upon
completion of the house sale.

There is still a question-mark over the fact that this tax was
originally drafted as a social security charge (“CSG RDS”) but is now
being called a gains tax. The European courts ruled that it is not
legal for a member state to charge a resident of another member state
social security charges. However, because of the subtle change in
wording this will not stop the government implementing the tax -
which, in any case, is only equal to that paid by French residents so
seen as fair in its application.

Wealth tax

French wealth tax is calculated on January 1st each year and is
payable by those residents with assets worth over €1.3m. Returns have,
of course, already been submitted for 2012 but President Hollande has
introduced a one-off “exceptional contribution” where individuals pay
the difference between the old & new rates.

The tax is based upon the wealth of the household and unmarried
couples living together are treated as one household.

Don’t forget that the market value of your principal residence in
France if thats your main residence can be reduced by 30% for wealth
tax purposes.

The new tax bands are as follows:

upto 800K€       = 0%

€800K -1.3M€   = 0.55%

€1.3m – €2.57m = 0.75%

€2.57m – €4.04m = 1.0%

€4.04m – €7.71m = 1.3%

€7.71m – €16.79m = 1.65%

€16.79m+ = 1.8%

Clearly you should seek professional tax advice based upon your
individual circumstances but the changes mean that, for some
individuals, it may well be worthwhile looking to buy your property
through an SCI (french property holding company) using the “corporate
tax” option so that the property is not included in wealth tax
calculations as it belongs to a company or professional venture
capital fund.  Equally it makes more sense than ever to fund the
purchase through a mortgage, while rates remain this low, which will
reduce the amount of capital held in France by non-residents.

As has been well documented in the national press, many wealthy
residents believe they have been directly targeted and thus have been
looking to leave the country.

Measures are also being put in place to further modify the “exit tax”
that was put in place by President Sarkozy in March 2011. Those with 2
children and assets below €200,000 should not be concerned by the
changes but those over this threshold should continue to monitor the
papers coming out of  the Assemblée National.

Please do come and meet us in Birmingham or London next month at the
NEC 28th – 30th ‘A Place in the Sun exhibition’  or London Olympia
‘French property exhibition’  5th – 7th October where we will be on
stands FR9 and 23 including a seminar programme on ‘Where to live in
France’, We will be happy to talk to you about France and your
property requirements.