On Tuesday the general manager of the INSEE, Jean Philippe Cotis explained that the surge in housing prices in France over the last few years seems predominantly linked to the lack of offer rather than to financial speculation, unlike the situation in Anglo- Saxon countries or Spain.

This opinion of the National Institute for Statistics is very different to that of the Centre for Strategic Analysis who announced some days ago the creation of a property “bubble” in France which is likely to go down to terrible effect.

According to a new study called « prices and rents of old properties between 2000 and 2010 » published on Tuesday by the INSEE, old property prices in France had increased by 141% over the period 1998-2010, that is to say 3 times faster than incomes (+43%). At the same time, controlled rents were increasing by 33%, that is to say an average of 2.4% per year, a rate higher than inflation.

No excessive investments

Thus, the property price curve in France had a relatively similar course to the United States until 2007. And in 2009, whereas old property prices were decreasing sharply over in the US to reach a level quasi equal to the one at the beginning of the noughties, the correction in France has been limited (-7% in 2009) and prices quickly went up again (+6.3% in 2010), as well as the volume of transactions, practically back to its level pre- crisis. However, there is no investment surge and French property prices do not result from an excess of investment in housing which could have justified the property price rise as in Anglo- Saxon countries and Spain.

According to statistics of the FPI (Federation des Promoteurs Immobiliers) property put on sale in France decreased by 11% in the first quarter compared to the same period of the previous year.

Housing weight more and more on budget

According to the INSEE, because of the explosion in property prices which increased much faster than their incomes, the French are dedicating more and more their budget to housing. And according to a study called “Being cold or spending too much money to warm oneself up” published in 2008, 3.8 million households (14% in total) are in a situation of “energy precariousness” because they dedicate more than 10% of their income to pay their energy bills in order to have heating and electric lightning.

30% of French people have to reimburse a mortgage. In seven cases out of ten, the mortgage is used to buy a main home or another property and in other cases, it is used to finance renovation works.

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It appears everywhere, with new build developers, house builders, renovators… Even the PTZ+ (new interest free loan) welcomes it honourably… In short, the energy efficient label (BBC) which will become incontrovertible by the 1^st of January 2013 has become an essential stage.

What form does the BBC Effinergie label take?

Building a new accommodation involves respecting thermal regulations (RT). In the meantime and before the RT 2012 for residential housing takes effect, it is the RT 2005 that prevails. But the BBC label in new build has further requirements, on the basis of a frame of reference established by the Effinergie Association. At national level, a BBC building has to meet a certain threshold of air permeability and consume a maximum of 50kWh/sqm/year of primary energy (80kWh/sqm/year for the renovation, according to the decree of September 29^th 2009). However, this value is modulated according to climate areas and altitude. A coefficient which varies from 0.8 to 1.3 according to regions is applied at the value of 50kWh/sqm/year. If the building is located in the Yonne department, for example, its primary energy consumption will be calculated according to a coefficient of 1.3. It will respect an energy efficiency of 65kWh/sqm/year. In southern France, this coefficient is reduced to 0.8, which means 40kWh/sqm/year. It is the same if the building is situated at altitude (coefficient from 0 to 0.2).

What is primary energy?

It is the energy available in nature before any transformation. For BBC new builds the average of 50kWh/sqm/year of primary energy is based on heating, hot water, cooling, ventilation and lighting consumption. It does not represent the final energy consumption, that is to say the one including other home equipment (household appliances, hi-fi, TV etc.) which increases the energy consumption from 50 to 60kWh/sqm/year.

What does the BBC label offer?

It offers a higher comfort level energy savings. Compared to accommodation built according to the RT 2005 which consumes an average of 150kWh/sqm/year, BBC buildings reduce the bill of primary energy by a third. A significant sum when energy prices keep increasing. However a damper on proceedings: the average consumption of BBC buildings is based on conventional use (19˚ C in the daytime, 16˚C at nighttime in bedrooms). Without respecting certain criteria (if you open windows even when the heating is on or if you are not satisfied with 19˚ C as a daytime temperature for example) the bill may increase noticeably.

Other precision: the BBC label is allocated to buildings and not to apartments, whereas between an apartment situated on the ground floor and another on the top floor, there are inevitably differences. Another advantage, the possibility for first time buyers to obtain an amount of PTZ+ that is much higher for a BBC than a non-BBC. Regarding rental investments, the Scellier operation also privileges the labeling, meaning new BBC buildings benefit from a tax reduction of 22% compared to 13% for others, that is to say a difference of 9 points.

What price:

A new build trademarked BBC costs on average 5 to 6% more than classic accommodation. This is explained by the necessity of improving the building insulation, increasing air tightness, and installing more efficient heating, hot water and ventilation systems.

Who deliver it?

Three organisations certify residential housing: Cerqual (new or renovation), Promotelec and Cequami, the last one only working with individual properties.

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The upturn in the building market is now confirmed. According to the latest statistics published on Wednesday by the ministry for sustainable development, new-build building sites in France had increased by late March by 12.4% over one year, with 372 756 units and by 33.7% over the last three months compared to the previous three months with 106 156 units.

In the non residential sector, building sites have shown a 23.1% increase over three months, with 7 164 500sqm, but decreased by 9.5% over one year with 23.67 million sqm. Building permits increased by 13.4% from January to March compared to the same quarter a year before with 8 750 900 sqm and are increasing by 4.0% over one year with 35.15 million sqm.

The increase of building sites in the non residential sector over three months is particularly due to hotel accommodations (+66.1%), offices (+50%) and industrial buildings (+33.1%).

Decrease of the demand in April

According to a distinct investigation of the INSEE carried out with property developers, and published on Tuesday, the demand for new build properties to buy has sharply decreased in April, the corresponding balance of opinions falling to -34 which is under its historic average, that is to say fall of 19 points  over a month.

However, contractors surveyed by the INSEE foresee an increase in building sites whether it be for housing or for the buy to let market.

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The rent index of the PACA region has increased by 58.8% over ten years from 1998 to 2008 and hasn’t stopped increasing…

Buying a property in Provence Cote d’Azur in 2011, means having the opportunity to rent it at a high price and to increase the rent a little more each year and increase your profits.

But not all properties will generate  the same profit margins:

As shown by the table, studio and 2 room apartments where the square meter costs around €16 and €12.6 are the most profitable kind of properties.

Moreover, thanks to its low tenant turnover rate the Provence Cote d’Azur is one of the better regions to invest.

As shown by this Map the PACA region is one of the regions where tenants stay longer and where investors are the most likely to have serious people renting their property.

Here is an example of studios that you could purchase in the PACA region: Ref 31466

Close to the port and beaches this beautiful 5 storey residence located in a charming Niçois district, near the luxury hilled quarter of Mont Boron offers 66 well equipped studio apartments of 19.05m2.

Each studio comes with:

-          PVC roller blinds

-          3 point security locks on the front door

-           A videophone

-           Tiled bathrooms with heated towel rails and tiled floors.

The residence is few minutes from the old town, the port, the Gare Riquier, the TNL shopping centre and the St Jean d’Angely faculty, so it is ideally located.

For information do not hesitate to contact Sextant French Property by email: info@sextantproperties.com or by phone on: 020 7428 4910

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Why were leasebacks introduced?

The initial aim of the scheme was not only to create new jobs, but also to increase the supply of holiday homes and, consequently, improve tourism in France. After the start of the Cold War in the early 50’s, the Suez Canal crisis in 1958 and the Cuban Missile Crisis in 1962, the world entered into a ‘Thaw’ period in the late 60’s. People wanted to experience something new, and this is how the great expansion of tourism happened. Around 1968-69, following the increasingly large number of tourists visiting France, the French government recognised the real need to develop investment in the construction of tourist residences.

How were leasebacks introduced?

In the early 80’s, the French government launched the LMNP (Location en Meublé Non Professionnel) which is a fiscal system to build wealth in real estate on favourable terms. The purpose of this system is to increase the quantity of accommodation on the market. Little by little, the famous motto ‘BUY TO LET’ appeared. The ‘lease’ concept was officially born when the French government decided to introduce the ‘leaseback’ model in the late 80’s to augment the amount of quality holiday accommodation available in areas capable of attracting more tourists. This strategy worked very well, all the more so as this concept appeared and began developing at a time when the country’s construction industry needed a boost.

As an incentive to investors, the government allowed the VAT (19.6% for new build properties in France) on the purchase price of properties built for tourism or ‘leaseback’ purposes, to be recovered, representing a significant saving on the purchase price. This incentive, combined with massive investments in roads, trains and supporting infrastructures, as well as climatic, culinary and cultural benefits, led France to become the world’s most visited country!

What about leasebacks today?

Nowadays, leasebacks represent an important and strategic area not only for the real estate market but also for tourism. Indeed, If you regularly have a look at our French leasebacks, you’ll see they are located in or close to tourist areas (often near the seaside or ski resorts…) For example, they’re often located in the French Alps and in the south of France (to be more accurate along the French Riviera and Languedoc region).

Leasebacks properties have a lot of advantages such as:

- Low risk investment

- Hassle free maintenance

- Financial (tax) advantages

- The investor can use the property himself (depending on the terms of acquisition)

- Possible good returns

- The asset will be well looked after

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Here are the criteria of this brand new offer:

Minimum loan of €50,000
Max Loan to value: 120%
Fixed interest rate at 1.25%
Term: up to 40 years

If you are interested by this offer you should hurry! Because this mortgage is only available today for the 200 first customers on a first come first serve basis.

This offer seems to be unbelievable but as mortgage loans are an important way of attracting new clients, a lower interest rate is necessary to re-launch the UK market. Indeed, current rates have proved a popular incentive but more is needed to really quick start the mortgage machinery again.

We hope that you will take advantage of this offer and make the most of this fantastic mortgage to buy your dream French property. Of course it is also very good news if you took out a mortgage some years earlier or at the beginning of the year because interest rates have never been so low.

So, now it’s up to you: take out a mortgage now or wait…

For more information do not hesitate to contact Sextant French Mortgages on 020 7428 4918 or by email on info@sextantmortgages.com. But…

Before doing this, you should take a look at today’s date (April 1^st) and should remember that this is April Fool’s Day (Poisson d’Avril in French), a day to mislead people and play practical jokes on them, as well as to attach  paper fish onto victims’ back without being noticed…

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Today, leisure extends into all sectors including real estate. During your French holidays, it is now very easy to take part in an activity even if you have never practised it before: it is an opportunity to discover France as you’ve never seen it before.

Whether indoor or outdoor, in summer or winter, here is a list of activities you could enjoy:

=> In the countryside:

Country leasebacks are also often close to the seaside. Hence, you can find many leasebacks on the French Riviera set at most 30 miles away from the sea. With good weather, you will find residences where you can find the following:

-          Football pitches

-          Badminton courts

-          Tennis courts

-          Dance floors

-          Swimming pool: either for swimming, diving or water polo…

-          Horse-riding: particularly when your apartment is located near a forest and part of a beautiful landscape, as local tourism is working well these days thanks to such small scale attractions.

Should you have a river or lake a stone’s throw from your residence, you could even practise canoe, kayak, rafting or pedalo boat…

=> In the ski resorts:

In the mountains whether in the summer or the winter, you’ll always be able to enjoy what nature has to offer.

Winter activities:

Of course, the first activity that comes directly to mind is skiing or snowboarding. Moreover, 99% of French ski resorts also offer sleigh rides! It is an opportunity to discover the mountainous landscape in an entirely new way  . And when it’s cold outside, luxury leasebacks often include well-being centres with fitness, spa, sauna and hammam.

Summer activities:

It is worth trying paragliding or hang-gliding in summer to take in the landscape as well as to literally get a breath of fresh air (in summer, temperatures in the mountains can reach up to 40 degrees in the shade). Another way to admire the landscape is by  helicopter ride, an experience you shouldn’t miss.

If you are used to teeing off like Lee Westwood or Ian Poulter, you will find a golf course in every ski resort in the French Alps. Unfortunately, on account of the huge amount of space needed for a golf course, it is still rare to find an 18-hole in a resort.

=> By the seaside:

By the seaside, apart from the pleasures of sunbathing, there are various clubs offering afternoons of deep-sea diving! Discover the ocean floor and observe marine animals in their natural environment (fishes, algae, coral reefs…).

If you are ready to show off your prowess, show off by windsurfing, water skiing or kite surfing along the beaches.

-> Don’t believe that these sports are reserved for a certain category of people who can afford them. You can actually take lessons at prices far lower than you’d think. You don’t have to go to every class if you don’t want to. Although the more you go the quicker you’ll pick up the sport.

You’re on holiday, so have fun!

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February 2011 saw a confirmed yet measured rise in interest rates which started at the end of last year: the average rate over 20 years is now established at 4.05%, compared to the 3.94% of January 2011. Since November of last year when rates were at their lowest ever, we’ve seen a 0.40 increase.

Banks have in general gone ahead with several adjustments. Those that hadn’t raised their rates these past two months have done so now, sometimes by a lot, whilst those that had already published interest rate rises in December and January have lowered them slightly now. These adjustments by the banks show their will to not block the market, mortgage loans remaining an important way of attracting new clients.

Thus in February, roughly 39% of banks have raised their rates by an average of 0.17, although some have gone up by 0.70. Then again, 37% of banks have lowered their rates by 0.11. The 24% left have remained stable.

This progressive climb in rates is inevitable over the next few months

.

Even though interest rates are rising, there is still time renegotiate, especially for mortgages that have been taken out in 2008, a year in which the rates were as high as 5.15% over 20 years. For example, a borrower who has taken out a loan in August 2008 over 20 years at 5.05% could save himself 23 000 € with a new rate at 3.80% over 18 years, and up to 42 000 € with a rate of 3.55% over 15 years, which equates to a 32% drop in the price of the loan.

For more details regarding French mortgages, you can have a look at our website dedicated to French mortgages: http://www.sextantmortgages.com
If you would like to receive a free quote with no obligation, contact our in-house mortgage consultants by telephone: 0207 428 4918 or by email: mortgages@sextantproperties.com

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.–> What’s the current situation?
The latest updates show that individuals are not having as much trouble finding financing as was previously supposed. Indeed, interest rates have kept dropping all year, all the way until the end of last year.

.
–> What does this mean for me?
Taking a French mortgage out is now easier for any individual, but also for the Real Estate market. For the latter, we can therefore assert that they have started to see the light in the economic crisis because the mortgage engine is working once again.
.
–> In this case, is it good news?
If you are considering a fixed rate French mortgage at its lowest rate ever, it is high time for you to take a loan out.
You can check the rates out below:

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–>But be careful, things change rapidly!
Since the end of 2010, rates have picked up slightly but not to a worrying extent. As an example, if you borrow the sum of £150,000 over 20 years – i.e the Real Estate credit in France – an increase from 3.50% to 3.80% is equal to an increase in £23 a month. But despite the little rise, rates remain more profitable compared to 2008
.
–> What are the long-term consequences?
Unlike before, rates will increase in the long term. They will keep increasing on account of the State’s incertitude in mastering their deficit as in Portugal and Ireland. It is merely a temporary problem.
.
–> Will 2011 continue as 2010 ended?
As banks get to pursue new customers in the economic recovery and also through Real Estate credit, current conditions remain profitable for borrowers. Let’s not forget that this increase is based on the lowest interest rates of all-time since the end of WWII.
.
For more details regarding French mortgages, you can have a look at our website dedicated to French mortgages: http://www.sextantmortgages.com
If you would like to receive a free quote with no obligation, contact our in-house mortgage consultants by telephone: 0207 428 4918 or by email: mortgages@sextantproperties.com

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We would like to share some good news with you – if you are a British resident and own a property in France (or in the EEA) or are thinking of buying one, and if it qualifies for Furnished Holiday Lettings status (rented out for a minimum of 70 days a year on holiday lets or a French Leaseback) – there is a tax break that you may not know about.

This tax break helps to claim back substantial Capital Allowances - letting you save on a huge amount of tax.

You could also save a lot of money but to take full advantage you need to act quickly as there is a deadline of the 5th April 2011.

To give you an idea of the potential tax saving: if you bought a property for 500,000 euros and you are a higher rate UK tax payer the tax saving is in the region of UK £35,000.

Approximately UK£15,000 can be repaid by the UK tax authorities from tax previously paid with the balance coming from savings tax that would otherwise be paid in the future.

Even though many of us might have bought our apartments a while back, we can still claim these Capital Allowances for the last few tax years as well as the current and future tax years.

This is something that you need to move fast on, as many of the benefits are reduced from April 2011 and in some cases, the savings will be even higher if you submit your claim by the end of this month.

If you think this could apply to you, please contact Quintin Bull.

His email address is q@quintinbull.com

Telephone number +44 7796 695750

Finally, if you buy another property before the end of this current tax year and already have a Furnished Holiday Letting or a Leaseback, you can also obtain this same amount of UK tax refund against your income tax being paid on your total earnings in the current tax year ending 5th April 2011.

So we thought we would make a couple of suggestions of potential properties you could buy that the tax break will massively facilitate.

Here are some suggestions of examples that qualify for this scheme:

Leaseback in La Plagne:
Leaseback in Briancon:
Leaseback in Provence:
Leaseback in Fayence:

For more information and news about buying a property in France, visit the Sextant website at www.sextantproperties.com

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