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French Property: Is the new less expensive than the old? | Sextant New build - Find new Build properties and Leaseback in France
 

French Property: Is the new less expensive than the old?

The price differential between new and old property diminishes if one looks at a comparison of property cost over the last decade due to increased charges in the old properties.

Increased renewal works’ have to be carried out on old property, notably those involving energy and safety, which have been classified as compulsory by the law. In the coming years, this will put a strain on the profitability of older houses. It is therefore more important than ever to make the correct calculations.

Some buyers’ are satisfied. They prefer a new property over an old one because they wish to buy the property “hands’ in pockets” without the constraints of re-development works’. For them, the comforts of heating and sound-proofing insulation, as well as standards of safety, are equally important. All this comes at a price that they are prepared to pay. For other buyers, only the price is important. They do not hesitate between a 70m2 new property at €280.000 and a 70m2 old property at €210.000. “Saving €70.000 is worthwhile”, they say. Of course this is a reasonable point but the calculation isn’t entirely fair.

The older properties bear more important burdens….
The cost of purchasing an old property plus the increased notary fees (6-8% instead of 2 – 3.3%) and the fees for renewal work, systematically ensures that if need be fees are incurred for inherited works’ on the property. So, a face-lift for the property or a replacement boiler represents a significant cost. In a new building, these costs are practically non-existent for the first 10 years.

Expected to widen further in the coming years…
Spending should increase further in the future because of increases in planned works’. In fact, recent laws have been enacted due to the desire to protect the consumer and the environment by making some work mandatory and others’, highly recommended.

Compulsory work
The law of 2nd July 2003 requires that private lifts installed before 27th August 2000, be upgraded in order to comply with current regulations. This process is set to last for 15 years (until 2018). For its part, the law of 3rd August 2009 relating to the establishment of the “Grenelle Environment” stresses that greenhouse gas emissions must be cut by 25% before 2050. In this way, the State has made it its goal to completely renovate 400,000 homes each year up to and including 2013.
This work will however be costly.

Highly recommended work
In turn, the increase in test techniques which are used before selling a property will generate increased costs’ for a large number of old properties. The current tests concern the presence of lead, asbestos or termites in the property, the state of the gas and electrical fittings and furthermore, their energy output. From 2013, there will be an additional test on drainage systems which are unconnected to mains’ drainage. It is very likely that other assessments will be added to the list in the future. These tests, which are designed for the buyer, are of course informative only. Except in major cases’ (if a danger is proven), the seller is not obliged to start renewal work. Neither is the buyer, although perhaps they will do it all so that they can improve the safety of their home and reduce the energy bills’. The report increases the price of the property further. Even if the works’ aren’t carried out, the presence of these tests showing the problems of the property risk representing a potential “de-valuer” on the price, in light of an eventual re-sale.

“The new: less expensive than the old?”
In any case, it seems fair to add the total bill of these works’ to the acquisition price of old property in order to gain a true estimate of its value. Our example earlier, the saving of €70.000 between properties, is without doubt considerably reduced. In the years to come, it is highly possible that for certain types of categories of properties, a decennial assessment between new and old will show that the new property has the upper hand.

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This entry was posted on Wednesday, March 24th, 2010 at 6:42 pm and is filed under French New build . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.


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