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The pound has been looking sickly since the summer. It has done well enough against the US dollar, which has had its own generous share of trial and tribulation, but against the euro it spent the bulk of September and October heading south. Then it stopped. Why did it happen and does it represent a turnaround in sterling’s fortunes?

First, look at why the pound spent the last two months under the cosh. Investors were selling US dollars. To sell them they had to buy something in their place. Equities and commodities are always an option of course but for anyone wanting to stick to good old money the easiest and most liquid alternative to the dollar is the euro. The euro went up and the pound was left behind. As well as the technical reasons, investors had other motivations for staying away from the pound. Its two demons were the risk of a slowing economy and the threat of quantitative easing.

Since its election in May the coalition government has made it abundantly clear that to get rid of its inherited structural deficit will mean a period of austerity for all. Investors feared that sharply reduced public spending would mean job losses and a plunge in household spending that might push the economy back into recession. They also worried that another round of quantitative easing by the Bank of England would dilute the value of the currency, sending it lower. The first concern came true when the chancellor confirmed in his spending review that half a million jobs would disappear in the public sector and accountants Price Waterhouse Coopers predicted the loss of another half million at private companies. As for quantitative easing, one member of the Monetary Policy Committee voted at the October meeting for another £50 billion of it. Things looked bleak for the pound…

…until, with a single bound it was free. The provisional estimate for gross domestic product (GDP) in the third quarter of the year was that it grew by 0.8%. The figure was twice as big as the 0.4% that analysts had predicted. Taken together with the previous two quarters’ 0.3% and 1.2% it meant that Britain’s economy grew by 2.3% in the first nine months of the year. The news coincided with an announcement by ratings agency Standard & Poor’s that it had reaffirmed Britain’s AAA credit rating.

So sterling got a result from the GDP data but that does not guarantee its longer term success. The chancellor’s spending review will be tough framework for the economy to live with. Job losses and spending cuts are not an obvious recipe for growth. Mr Osborne hopes the private sector will take up the slack but nobody will be entirely convinced that it can until they see evidence of it happening. The one positive aspect that ought to linger for the next month or so is that the Monetary Policy Committee will find it hard to justify a fresh round of quantitative easing with inflation above its target range and the economy still pushing ahead.

The GDP data, together with a reaffirmation of Britain’s AAA credit rating, mean sterling is off the hook for the moment. But although it has won the battle it has not yet won the war.

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The map search feature is here! Sextant New Build is proud to present its shiny new feature- Google map search! As the only French property website to offer this, we hope you’ll agree it really makes a difference.

It’s very easy to use. On the home page, click on the “Map Search” tab, which will take you to a map
of France, showing with blue squares the location of every new build property currently on our site. If you’d like to narrow down your search, click on region and in the drop down menu, select the region you’re interested in, for instance Languedoc-Roussillon. You can also choose the category (whether you’re keen on being in a ski, golf, country or seaside environment), then click on search. You’ve now got a more precise selection of properties to view. Alternatively, you can first choose the region or category you’re interested in on the home page, click search and then change from list view to map view. Importantly, you can see how far they all are from each other and how far they are from landmarks and towns. The scale will give a good indication of distances. When you click on a little blue square with a house in it, all developments located in that town or village will appear, with vital information- price, number of bedrooms, their Sextant reference and of course, a photo.

Don’t forget, these locations are based on French postcodes. This means the properties may not be on the exact spot featured on the map, but will be very close by.

For those of you wondering when the feature will be available for our resale properties, watch this space…

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With doubts regarding the economic growth, the European Central Bank (ECB) should not modify its key interest rate, at the record low level of 1%, before the next year. By consequence, Interest rates in August remain unchanged compared to July 2010. They are still lower compared to January 2010 with the Euribor 3 months rate at 0.899% so it is the still a good time to take on a fixed rate, at their lowest value ever.
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French interest rates and how they work
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Most of the French Mortgage lenders index their rates to the Euro Interbank Offered Rate, or Euribor, the average interest rate at which term deposits are offered between prime banks in the EU wholesale money market or interbank market. Just like the LIBOR serves as a short-term reference rate for British Pound and U.S. Dollar, the Euribor is widely used as a reference rate for Euro.
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The French banks usually index their rates to Euribor 3 months currently at 0.899%. Each bank applies a margin of between 1.30% to 2.50% depending on the lender and the product’s features.
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Variable products are usually redemption penalty free, although some banks may charge penalties in case of a re-mortgage. Fixed products are currently very low and very popular, but capped products starting at 3.50% and capped at 4.50% are also recommended in the current climate.
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Best French Mortgage products currently on the market
1. 100% LTV French mortgages with capped rates starting from 3.50%*
2. Rates fixed for the entire term starting from 3.15%**
3. Some French products are capped at 1% above the initial rate, to give you more security
4. Interest only mortgages with variable rates starting from 2.85%
5. Rates starting from 2.40% for equity release and re-mortgage
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* You would only be expected to pay the Notaire fees and the estate agent’s fees. Available only for properties of over €300,000
** Over a short term of 6 years on a repayment basis, for a loan of or above €230,000
***Higher rates may be applicable for longer terms and different loan amounts
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For more details regarding French mortgages, you can have a look at our website dedicated to French mortgages: http://www.sextantmortgages.com
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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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The total figures of French property mortgages granted by the French banks in 2010 should reach €140 billion in 2010, which is 17% more than in 2009, but remains far from the 2007 record of €170.23 billion, according to a study by the French central institution of property mortgage security “Crédit Logement/CSA”, published last Wednesday.

However, French mortgage rates have continuously kept on dropping since the end of 2008, getting closer to their historical floor (3.36% in the 4th quarter of 2005), to settle around an average of 3.42% in June, whereas they were still at 5.07% in the last quarter of 2008. The consequence for borrowers is a decrease of almost 10 % in monthly payments in comparison with 2008, emphasizes Crédit Logement.

“Unemployment and purchasing power outlooks are still standing in the way of a real upturn in mortgages” says Michel Mouillart, the author of the study.

Despite the war for new customers among French banks, the other phenomenon affecting the mortgage market is the soaring of French resale property prices, which are now about where they were before the 2008 crisis.
Since the end of the 90’s, French prices have risen by 140%, and are now 22 times higher than in 1964, which is much more than the inflation, Crédit Logement notes.

Source: Le Figaro

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Major French developers all adopt LEB standards early (Low Energy Building).

LEB. For the last couple of months, it has been all the developers can think of. Behind this expression lies a new law, which will come into force in January 2013.

In practical terms, all housing will have to use less than 50 kWh (kilowatt hour) per square meter and per year. It is three times less than the current law. But it is just a national average. “The LEB law will be adjusted according to the regions. In Marseille, where the weather is nice, it will be 40 kWh; in Paris, a cloudier area, it will be possible to reach 65 kWh”, adds Benoit Arviset, development manager in Quatrinvest, a rental property investment specialist.

Bouygues, Nexity, Kaufman & Broad but also Les Nouveaux Constructeurs, Bouwfonds Marignan… Almost every big French developer has decided to anticipate the call. From the 1st of January for some or from the 1st July for others, all their developments have the BBC (French for LEB) label.

Tax benefits
The reason for such an enthusiasm is the great benefits developers can get out of it: in 2011, only BBC-labelled buildings will allow their buyer-investors to benefit from the Scellier system at its fullest, with a tax reduction of up to 25% for French investors. Without this label, tax benefits are limited to 15%. “It is quite a big deal for developers, because investors account for almost 66% of sales in France”, Paris-X University teacher Michel Mouillart adds.

Thus, the developers’ imagination is limitless when it comes to respecting the law. “Putting in condensing boilers is a good way to save energy” adds Bruno Corinti, chairman of Nexity Logement. “The building’s insulation is also very important” continues Marc Pigeon, chairman of the FPC, the French federation of developers.

Whatever the techniques used, professionals all agree on something: the shift to Low Energy Buildings increases the costs of construction by 8 to 12%, which represents an increase of 4 to 6% on capital assets costs.

In view of this situation, 2 choices can be made. Bouygues and Les Nouveaux Constructeurs both claim that their prices will not go up. The others intend to increase their prices to face this sharp rise in costs. “Because of the BBC law, our prices will increase by 3 to 5% next year” states Guy Nafilyan, CEO of Kaufman & Broad.

To find out more you can speak to one of our French new build consultants on 020 7428 4910

Source: Le Figaro

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Keeping your account in the UK while living in France is a possible but rather expensive solution, as banks very often charge for withdrawals and financial operations in a foreign country. This is why you should consider opening an account with a French bank, for holiday stays and especially for a permanent move to France. To do so will help you tremendously in day-to-day purchases but also for rents and if you’re thinking of getting a French mortgage.
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The procedure of opening a bank account in France is fairly simple, and you will just need to bring the following papers with you:
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- A proof of identity, such as a passport or a national ID card
- A proof of your address, such as water and electricity bills, or your housing contract
Once your account has been opened, you will be given a debit card usually called “carte bancaire” or “carte bleue” and a chequebook.
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Your first French carte bleue will cost you about €30. In France, cards work with the chip and PIN method, and your PIN code will always be asked for payments and withdrawals. Also, it has to be noted that some shops require a minimum amount, usually around €8, for card payments. It does not work quite the same as in the UK: the sums of money spent can be deducted from your account immediately or at the end of the month, depending on what you have decided with your bank. A signature will always be required for payments over €1,500. The “carte bleue” will be your best asset when living abroad, as you can use it to pay for almost everything. A huge majority of shops, restaurants, bars, cinemas, motorways, online shops etc accept card payment.
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Cheque payments are widespread in France. However shop owners may ask you for a proof of identity. It will take a few days between the day you actually sign the cheque and when the amount is debited from your account. It is very important to note that in France, it is illegal to try to pay by using a cheque with an insufficient account balance. That is why some shops systematically refuse any cheque payment. If you do write a rubber cheque, you might face an “interdiction bancaire”, which prevents you from writing a cheque and using your credit card until the situation has been sorted out. This is why you should always make sure you can cover your cheques.
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When opening a bank account, it is also important to choose which kind of account will suit you best.
A “compte courant”, French for current account, is a very active account which allows immediate cash withdrawal at anytime, and is used for common operations between the bank and its client.
A “compte sur livret” or “Livret A“ is the most used savings account in France. It is not used for day-to-day operations, but to yield interests.

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If you are looking for financing for your new leaseback project, the 104% mortgage product is one of the best financial products of the moment. Launched this July by a French bank, you only need to pay the bank fees. There are two options available with this product: repayment or interest only.

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Let’s take an example to explain how this product works. In Brittany, Sextant French Property offers a leaseback in Benodet. For €236,520 (VAT excluded), you can have a 1 Bedroom Apartment in a secured residence with sauna and heated swimming pool.
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Most of the time, when you ask for a mortgage, you receive a mortgage for 100% of the total amount of the leaseback property (VAT excluded)). In this case with the “104% mortgage”, you will be able to receive 104% of the total amount. That means it will cover the purchase of the property but also the legal and tax expenses.
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Thereby, to be able to buy this 1 Bedroom apartment in Benodet, you need to make a deposit of 5% of the value of the property (VAT excluded)) that is €13,492. You will get back this 5% deposit when you sign the deed of sales in front of a notaire. Consequently, you will only need to pay the bank fees: 1% of the total amount. That is €2,365 in the case of the apartment in Benodet. To be clear, your new property will only cost you the bank fees which means that you will just need to have this amount available.
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To sum up, here are the main criteria of the 104% mortgage:

- 5% deposit of the VAT price (back at the deed of sales).

- Mortgage on 104% (VAT excluded)

- Only need to pay the bank fees.
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To apply this 104% mortgage product, here are the main requirements to be eligible:

- Age: from 18 to 75 years old (before the end of the loan)

- Maximum debt/ratio: 30%

- Can be employed, self-employed or retired.

- If you apply for an interest only, you must have a side investment of 20%.
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This product is available for a shortlist of French leaseback companies. If you are interested, don’t hesitate to contact one of our Sextant Consultants on Sextant New Build Website. And if you are not eligible for this product, don’t worry! Contact one of our Mortgage Advisors by Sextant Mortgage Website since there will always be a mortgage adapted for your project.
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According to foreign exchange and international money transfer specialist Moneycorp, prospects are poor for the British real estate market, as 25% of potential first-time buyers consider purchasing a property overseas. This conclusion was reached after having asked 2000 Brits in the process of buying a property for the first time.
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This reluctance to buy properties in the UK can be explained by several reasons.
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First of all, housing prices in the UK have risen again since the 2008 drop and have reached expensive heights, which is rather disheartening for a person wanting to start out on the property ladder.
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When asked what the first thing to be taken into account during a property purchase was, 31% of first-time buyers consider currency to be the most important criteria. Unfortunately, the pound exchange has been very unstable lately, falling 17% in comparison to the euro and taking up again for 19 months in a row. These changes in value are an obstacle to a purchase, and even though the pound is getting stronger, buyers still think buying overseas the right decision to make.
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According to Moneycorp, 86% of first-time buyers are convinced that they will get more for their money in countries with stable currency and a thriving economy, preferably in the hottest, sunniest regions of the globe. The main trend among British buyers is that they would rather buy overseas instead of struggling to get an expensive home in the UK.
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The first destination for British real estate investments is Australia. According to Mr Wilson, head of the overseas property department at Rightmove.com, buyers see this country as a real alternative because of its homely image and the difficulty in getting an English mortgage. Then comes France, outranking Spain for the first time. Italy has fallen behind and so have the USA in the global popularity ranking.
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For more information, visit the Moneycorp page on the Sextant website.

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There are a number of reasons for buyers to invest in France through leaseback property resales as opposed to buying off-plan. Before we list those reasons, we shall remind you what a leaseback is.

Buying under the French leaseback scheme is like obtaining a discounted purchase price, with the VAT element ( 19.6% of the price ) which is advanced by the State. On completion of the purchase ( e.g. signing of the acte de vente) you are required to enter into a formal lease with the management company who will then rent the property out on short-term holiday lets. The leaseback contract covers a nine year period. Where the intention is to occupy a property for only a limited time each year, or even not at all, leaseback ownership can offer a regular rental income, without the burden of having to market the property personally, or employ local agents to do this. While such schemes normally offer a regular rental stream, it is commonly the case that the amount of the rent is lower than may be obtained for a similar property if sold directly, although this is probably the counterbalance for not having the burden of marketing the property, cleaning it, managing guests and so on.

So, here are the reasons why they are attractive investments:

- In hard times as we have recently seen and that some are still facing, there are great opportunities arising from the property market. For those who purchased a few years ago and need to sell quickly for whatever reason, some are happy to sell below the current market price for new build or close to the price they originally paid, so it is extremely favourable to buyers.

- From an attractive purchase price, you can benefit from a more competitive rental return. If you compare with what a new leaseback can offer, you could be better off with a resale in terms of profit margins.

- You will still benefit from the VAT advantage as you will ‘inherit’ the VAT benefit from the existing owner with no procedure involved as long as you accept that you will continue with the existing lease in place

- You get the same LMNP or leaseback tax incentive as if purchasing new, meaning that you can deduct your Notaire fees, mortgage interest, etc…from the rental income received to avoid paying taxes on rental income. And finally you can view the apartment you are purchasing, there is no off-plan mystery…which appeals to many investors who want to avoid any unpleasant surprises.

Virginie Hopps-Delplace | Specialist French Property Lawyer
for and on behalf of Charles Russell LLP

5 Fleet Place, London EC4M 7RD
(T) +44 (0)20 7203 5313
(F) +44 (0)20 3023 8024

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