Buying property in France: A guide for investors
Buying a property in France can be overwhelming, especially if you are a foreigner. However, when you know that France considers property a human right, you suddenly feel much less hesitant:
- 22% increase in property value in ten years,
- 90 million tourists per year,
- 6% average gross rental yield per year,
- The guarantee of property rights,
- Equality of all before the law,
- 23rd least corrupt country in the world (ahead of the United States, Spain and Italy).
To buy property in France with peace of mind, read these 10 points:
1. What are the requirements for buying a property in France?
The conditions for buying a house or flat in France are as follows:
- To obtain a bank loan;
- To be able to make a contribution of 20% of the price of the property;
- To go to a notary;
Obtaining a bank loan and a down payment
As a foreign investor, it is possible that the banks in your country will refuse to grant you a loan to buy a property in France. You may therefore have to invest through a French bank.
You should be aware that the current economic conditions have led banks to increase the rate of personal contribution to buy a property. Whereas for a long time it remained at 10%, the personal contribution required today by banks is 20% of the total amount.
In 2022, the average personal contribution to buy a property in France will be around 55,000 euros.
2. How much tax do I have to pay when I buy a property in France?
20% VAT plus acquisition costs. These correspond to approximately 3% of the purchase value of a new property, or 7 to 8% of the purchase value of an old property.
When can you benefit from the reduced VAT rate?
A reduced VAT rate of 5.5% can be applied, but only on the purchase of a main residence in a sensitive district, known as a QPV (priority district of the city policy), as well as in an ANRU (urban development and renovation) zone. These locations are not suitable for short-term rental property investments for tourism.
What do the acquisition costs correspond to?
The acquisition costs correspond to:
- To the notary’s emoluments: a tariff set by an official text called an “arrêté”;
- Disbursements: sums paid by the notary to the parties involved in producing the documents necessary for the sale;
- State taxes: departmental duty, additional communal tax, costs of assessing and collecting departmental duty;
3. How to find property in France?
There are at least seven different ways to find a property in France:
- Estate agents;
- Notaries;
- Property developers;
- Property dealers;
- Auction sales;
- Institutional investors;
- Flat hunters;
1. Estate agents
They are the first people you think of when you want to buy a property in France. The core business of estate agents is to put buyers in touch with sellers, or rather with the properties they are looking for.
To avoid dealing with just any agency, it is best to visit the websites of established agencies in France and contact them to tell them what you are looking for. The most reputable estate agencies are:
2. Notaries
This buying channel is less known, even by the French. Yet notaries, who are ministerial officers, offer properties for sale. They can accept a mandate from you to offer you the type of property you are looking for.
The advantage of going through a notary’s office is that the notary is often well established locally, especially in small towns. Moreover, they are the ones who manage successions. They are, therefore, on the front line to know which family wants to sell a property.
To buy a property in France via the notaries’ advertisements, you can go to this site.
3. Developers
Developers are the reference for new housing. Their business is to buy land and build housing on it. You can therefore buy flats or houses off-plan.
You cannot see the property before you buy, because it does not yet exist. This is called a sale in the future state of completion. As with estate agents, some property developers are market leaders in France:
- Nexity;
- Eiffage Construction;
- Vinci Immobilier;
- Altarea Cogedim;
- Bouygues Immobilier;
4. Property dealers
These are professionals who buy properties with a view to renovating them and reselling them with a capital gain at the end.
To buy a property in France from a property trader, it is best to have some knowledge of the building trade. If not, go with a friend who does. There are renovations and renovations, but not all are equal.
5. Auctions
One man’s loss is another man’s gain, as the saying goes. Auctions respond exactly to this spirit. These sales are organised by three actors:
- Notaries;
- France Domaine;
- The courts (judicial sales);
To take part, simply visit the websites of the notaries, France Domaine, and private partners, such as Vench, to buy a property in France by auction.
6. Institutional investors
These are banks and insurance companies, which still have a substantial property portfolio.
Since the 1990s, these institutions have undertaken to sell their property, to invest in office construction. Since 2015, however, the opposite trend has been observed.
This is because institutional investors have realised that the rental property stock is a safe investment.
7. Flat hunters
This is a service that is particularly popular with foreign investors. If you decide to use a flat hunter to buy a property in France, you should know that their role is to find a flat according to the expectations you communicate to them:
- Size;
- Location;
- Amenities in the area;
- Ceiling height;
- Lift;
- Etc.
Your expectations are only limited by your imagination.
4. Where to buy property in France?
Metropolitan France has around ten major cities, spread across the country. However, with Paris at the centre, it is the coasts that attract tourists and investors the most.
If you don’t know where to buy a property in France, because you don’t know what you need to pay attention to, there is a guide to rental investment that allows you to know all the important points to respect.
Buying property in Nantes
The city of the former Duchy of Brittany, whose castle it still houses, is now the capital of the Pays de la Loire region. Its economic dynamism and green landscapes make it the sixth most popular tourist destination in France.
What makes it a profitable investment is not only its rental yield, which is close to 5% gross per year, but above all its prices. For less than 5,400.00€/m², you can access the most sought-after areas, such as the Cité des Congrès.
Buying property in Paris
Investing in rental property in Paris is a good choice, but you should know that it is not the most profitable. The rental yield in the french capital oscillates painfully between 2% and 3% gross. This means that in terms of net rental yield, you can even lose money.
To remedy this, short-term rentals on Airbnb, intended for tourism, are the only way to benefit from an income. As the city of Paris points out, the rates for seasonal rentals are two to three times higher than those for annual rentals.
As a result, the gross rental yield in this sector fluctuates between 6% and 9%. There’s more to it than that.
Why buy in Paris with so little rental yield?
What makes Paris strong is not its rental yield. Property investment in Paris is based on the evolution of property values.
Today, the price of a square metre in the centre of Paris no longer falls below €10,000.00 and rises to €16,982.00 in the most beautiful districts. In central London, it is already between 18,000.00€ and 23,000.00€. The same is true of New York, which is a little less expensive, with a price per square metre that goes up to 18,000.00€.
So this is what investors are looking for when they invest in Paris: capital gains on sale. No doubt they will get it.
Buying property in Toulouse
Its capital, its rugby, its Garonne and its sunshine make the pink city a place for property investment, halfway between Bordeaux and Marseille. Moreover, with its 5% to 6% gross rental yield per year, it is as interesting as Marseille. Especially as it is hardly more expensive than the Phocaean city, with an average price per square metre of only €3,551.00. What you need to know is that Toulouse attracts 5.5 million tourists per year.
Overnight stays in the city’s flats range from 70€ per night to 700€ depending on the services offered. A godsend for all those who aspire to rent on a short-term basis, without the risk of rental vacancies.
Buying property in Bordeaux
Bordeaux has become the city of property appreciation. In 10 years, properties in the city have increased in value by a record 58.2%. Foreigners, like the French, aspire to live here for the quality of life that the city offers, nestled between the wine-growing manors and the Garonne.
In some places, the price per square metre has risen by almost 74%. With a gross rental yield of around 4%, an average price per square metre of €5,000.00, and seasonal rental nights negotiated at up to €1,000.00 per night, Bordeaux has a lot to offer.
Especially as the region attracts wine lovers, who know its name all over the world.
Buying property in Montpellier
Not far from Toulouse, Montpellier is another large city in the South of France. In these regions of Cocagne, where in the mouths roll the accent of the poet Frederic Mistral, Montpellier is an architectural wealth.
Its 1.5 million annual overnight stays guarantee a constant occupation of your property. Even long-term rentals provide an average rental yield of around 6%.
With an average price per square metre of €4,000.00, Montpellier is however slightly more expensive than its two neighbours, Toulouse and Marseille.
Buying property in Marseille
More interesting than Paris, the “capital” of the South has a gross rental yield of 5.1%. It is therefore one of the most attractive large French cities.
However, the recent rise in property prices has caused the rental yield to fall from 0.5 points above this. Short-term seasonal rentals can offset this loss of yield.
The advantage is that Marseille is a popular city for tourists. It enjoys 170 days of sunshine per year. With its blue coast and the numerous creeks that line its shores, 5 million tourists flock there every year.
The most interesting thing is the price per square metre:
2,222.00€/m² in Notre-Dame Limite,
6,328.00€/m² in Les Goudes,
3,385.00€/m² on average.
A tourist metropolis at this price remains a golden deal.
5. What are the pitfalls of buying property in France?
Like all countries, France has its share of crooks, and property is part of its playground. There are all sorts: former traders in league with crooked notaries, lone wolves, internet gurus. The list is long.
To buy a property in France safely, you need to know their tricks, and recognise the smooth talkers.
The property of the net gurus
Their advertisements are flourishing on platforms such as Youtube, Facebook, or Instagram: these new entrepreneurs, who claim to be experts in property, promise a rental return that not only covers all costs but also provides an income.
Those who are already familiar with property understand immediately that the net income from a single property will never cover the monthly loan payments, taxes, charges, maintenance, etc. For the rest of you, run away from these hucksters.
Their technique: make you believe that buying a property in France that nobody wants, renovating it and putting it up for rent, will make you a successful investor. The only thing you will gain is an over-indebted situation.
The diagnostics
When buying a property in France, the seller is obliged to give you five diagnostics:
- The DPE (energy performance diagnosis);
- Asbestos;
- Lead;
- Termites;
- Natural hazards;
Although they are all important, particular attention should be paid to the energy performance diagnosis. The Climate and Resilience Act of 22 August 2021 prohibits, from 1 January 2023, the letting of “energy flats”, i.e. properties consuming more than 450 kWh/m².
The situation is not going to get any better for landlords, as things will evolve as follows:
1 January 2023: a ban on renting out the most energy-intensive G-class properties,
1 January 2025: a ban on renting out all class G accommodation,
1 January 2028: a ban on renting out class F and G dwellings,
1 January 2034: a ban on renting out E, F and G class homes.
Be careful if you buy a property in France.You should be aware of:
Property ad scams
There are an increasing number of websites on which fake property advertisements are published. It is less and less rare to find flats for sale.
The aim is to get you to pay money to reserve the purchase, by making you believe that the list of buyers is so long that you need to be placed.
The scammer(s) will ask you to purchase PCS tickets, transcash, Neosurf or Toneo vouchers directly from your local tobacconist. Once the money has been placed in an account, via these coupons, a code must be given to the fraudsters so that they can withdraw the money.
How can you prevent this? When exchanging e-mails, look carefully at the header of the e-mail and determine the geographical area of the person exchanging with you using the IP number of the first router in the message.
If you exchange by telephone, don’t be reassured, because scammers use prepaid subscriptions for which they do not need to provide any identity.
Tensioned areas
These are communal areas in which the public authorities consider it difficult to find housing. As the Paris City Council points out, some arrondissements in the capital have up to 20% of properties rented out on a short-term basis.
As a result, many municipalities limit seasonal rentals to 120 days per year. Beyond that, you must register with the town hall, be issued with a registration number, and pay taxes as if you were a hotelier.
To find out which areas are affected, the French government has set up a website to find out if a property is located in a tense area. As an example, the following major cities are located in a tense zone:
- Paris;
- Marseille;
- Lyon;
- Montpellier;
- Strasbourg;
In other regions, such as the Basque Country, elected officials have tried to impose new rules, only to have them rejected by the administrative judge. Proof that the justice system ensures that property rights are respected, as we shall see later with regard to foreign investors.
Do the administrations have the means of their ambitions?
As we have said, Paris has arrondissements where 20% of the properties constitute short-term rentals. The regulations in place on tense zones have not changed anything.
Why not? Because rules are one thing, but they must be applied. The government’s budgetary savings prevent the recruitment of a large number of civil servants, and the trend is even downwards rather than upwards.
Therefore, the risks of being audited are relatively low, given the size of the holiday rental property stock.
6. Why buy property in France?
The French property market can be summarised with these figures:
23.5%: increase in the value of old flats in 10 years,
22.4%: increase in the value of new flats in 10 years,
6%: average gross rental yield across the country.
A property market spared by crises
The property market trend in France is bullish. Spared by the economic crises in the Spanish (1999) and American (2008) property markets, France has been a good student in terms of property practices.
Nevertheless, although speculation or securitisation of mortgages is not a fashionable practice in France, the country is still prone to cyclical property bubbles.
The cost of property regularly increases faster than the financial capacities of households. These market movements are normal, and it is, therefore, possible that after a property has been purchased, and its value has increased, it may lose value before returning to values higher than when it was purchased.
France, the most visited country in the world
Short-term rentals cannot find a better place than France, the most visited country in the world. Every year 90 million tourists flock to France.
Added to this is the fact that each region is full of breathtaking scenery and activities for the whole family. Buying a property in France is therefore a safe bet.
7. Can foreigners buy a house in France?
Yes, foreigners can not only buy property in France but also enjoy the same rights and obligations as those imposed on French citizens. The principle of equality before the law applies to all, regardless of nationality.
The right to property is said to be “inviolable and sacred”, whether it is held by a foreigner or a Frenchman. Consequently, the property of a foreigner is protected in the same way by the judge.
This is based on Article 17 of the Declaration of the Rights of Man and of the Citizen of 1789 (DDHC), and on Article 1 of the European Convention on Human Rights and Fundamental Freedoms (ECHR).
8. Is it worth buying property in France?
Yes. We have already discussed the increase of more than 20% in the value of property in France over the last decade. We have also mentioned the average rental yield which stands at 6%.
It should be noted that while some cities such as Paris stagnate at around 3% rental yield, other cities such as Roubaix achieve yields in excess of 10%.
What matters most when you want to invest abroad is the guarantee that you will always own the property you buy. So you have to look at the stability of the country.
France is a politically stable country
The period of political instability in France was between the Revolution of 1789 and the establishment of the Third Republic in 1870. Since then, governments have succeeded in one another without reversing power.
The two world wars and the two wars of decolonisation have not changed this, nor have the popular movements of 1969 and 2018, a sign of the country’s political stability.
9. Is it the right time to buy property in France?
Yes. Property is like the stock market: the right time to buy is always right now. Why? Because if you wait for the right moment, it never actually happens, because you only recognise it once it has happened.
How many individuals did not invest 10 years ago, betting on a fall in property? They have already lost 20% of the increase in property value.
Buy a property in France today, and be sure of a capital gain in 20 years. Wait, and you could be too old to reap the benefits of your investments.
Investments should always be made when you have the financial means to make them, not just focus on the current situation.
10. Invest with GuestReady in France
Maximum property profitability can only be achieved by doing short-term rentals. It doubles or triples the gross rental return, but requires constant presence. This can be problematic when it comes to buying a property in France without being on-site.
This is where GuestReady, a short and mid-term rental management company, comes in. The agency’s tasks include but are not limited to, the following
- Designing the decoration and photographs of your property;
- Publish your advert on the best sites, such as Airbnb;
- Optimize their placement in search engines;
- Ensuring 24/7 communication with your clients;
- Manage bookings in several languages;
- Checking in and out of the apartment;
- Cleaning the flat after each departure;
- Be available for your guests;
Thanks to GuestReady, you can invest in France, but also in the rest of Europe and even in Asia, without having to worry about being at the location of your rentals or having to manage an employee to do this work.
