Property Trends 2012

Photo: guy harrop / Alamy  

French banks, following in the footsteps of American mortgage lenders, are making it harder for home buyers to get a loan. Expat borrowers and French residents alike are being told "non" unless they have very large deposits and lofty incomes. BNP Paribas, one of France's biggest lenders to expatriates, overhauled its mortgage range for non-residents and has cut loan-to-value ratios from 80% to 70%.  They've also chopped the terms on interest-only loans -- but then these loans have always struck me as a perfectly terrible way to borrow money.  French banks are being cautious and rejecting borrowers with loan debt exceeding six times their income.  This seems reasonable to me, but it could affect people with several buy-to-rent properties or even some first-time buyers.  But then again, perhaps someone so heavily leveraged should rent for awhile before taking on more debt.  Call me old fashioned.

Despite the tightened lending, borrowers with sufficient income and smaller debt can still get a loan and French mortgage rates continue to look attractive.  French residents, more conservative borrowers than Americans, tend to like long, fixed-term rates and the interest rate on a 25-year-term is now set at around 4.4%.  There's also something called a capped rate deal where borrowers are promised they will not pay more than 4.5% for the term of the loan and the current rate for these is just 3.5%.

Meanwhile, FrenchEntrée just published their annual property survey based on feedback from their network of immobiliers (real estate agents) and property finders across France.  A few interesting items jumped out at me from this year's report, which showed real estate sales pretty grim in some parts of country but lively in others:

• There seemed to be fewer buyers from the UK last year, except in the Alps and Cotes d'Azur, but this was made up for by French, Dutch and Belgian buyers.  Increased interest from Australian and American buyers also showed an uptick. 
• Paris had a stunning year with a 22% increase in property values in the first half of 2011, although that pace slowed significantly as the year progressed. The number of transactions was down, but only because there weren't any properties to sell.  The 3rd and 4th arrondissements were hot.  
• The Languedoc saw more American buyers, as well as people from Sweden, Norway, Denmark and, of course, French seeking homes. The region already has an enormous British community.  A lot of people are taking a look at the Languedoc, which borders Spain, because of the anticipated completion of the TGV link to Barcelona at the end of this year.  Travelers will be able to get from Perpignan to Barcelona in less than an hour. Tapas for lunch! 

With all the gloomy economic news out of Europe, this all looks rather encouraging.

Good news for Owners of French Real Estate

The Fédération National de l'immobilier, the French estate agents' body, says average prices of all homes in France rose 6% in 2010 and property purchases exceeded 700,000 – a 15% rise on 2009. "Prices, after having fallen quite significantly – approximately 10% if we look at the end of 2009 – have regained a certain strength," says FNAIM president René Pallincourt.

The average price of a home in Burgundy is now €148,400 (£129,000), while in Languedoc the figure is €208,800 (£182,000) rising to €384,200 (£334,000) in Provence. The federation and lenders, such as Credit Agricole, predict rises of about 3% this year, with larger increases in cities.

French Legal Terms

A couple of week ago, a terrific newsletter published by FrenchEntree.com, offered a glossary of French legal terms related to the purchase of property. I ran into every one of these terms and wish I'd had this little list ahead of time.

Dont' be daunted. Just remember when you bought your first home in the United States and how initimidating that seemed at the time. It's just a matter of learning the lingo.

French Legal Glossary

achat - purchase

acte authentique – deed of sale

acte de vente (also acte d'achat) - transfer or conveyance of land

attestation d'acquisition - certificate from notaire that a property purchase has been completed

avocat - lawyer/solicitor

bail - lease or tenancy agreement

bon pour achat - good for acquisition – phrase often used in contracts

cadastre – land register or registry

certificat d'urbanisme – outlines the rights and planning laws that affect a piece of land/property. This is an important one because the Frency levy a substantial minimum fine for using land for a purpose beyond what is presribed.

clause suspensive - a conditional clause in a contract that needs to be fulfilled for the sale to reach completion

clause tontine – a clause that means the property will pass automatically to the survivor on the first death. This one is a little bit complicated and should be well researched and discussed with an attorney. Since I'm single, it was not an issue for me, although I did look carefully into the inheritance laws to assure proper passage of the property to my son.

compromis de vente - contract for sale and purchase of property. This is the first formal and legally binding step in the purchase of a property. It is roughly equivalent to making a formal offer and signing a contract in the United States. It binds both buyer and seller, is usually drafted by the French real estate agent handling the sale and is the point at which you make a deposit. The French have a nifty 7-day cooling off period, during which the buyer can change his or her mind without penalty. After that, if you change your mind, you lose your deposit. Read this carefully. It contains all the basic ponts of the sale. Do not sign anything you have not read and fully understand.

conditions suspensives - conditional terms in the pre-sale agreement

constructible - land designated for building under planning rules

copropriété - co-ownership

dépôt de garantie - deposit

dévis - written quotation

droits de succession – death duties/inheritance tax

émoluments – fees, as in a notaire’s fees

états des lieux – document detailing the state of repair or condition in general of property; in an off plan purchase, for example, there is an états des lieux on the handing over the keys.

expertiser - to assess or value a property

frais de notaire – total fees, including land registration duty, paid to the notaire on top of the sale price

géomètre or géomètre expert – a surveyor appointed by the notaire to ascertain the dimensions of the property

hypothèque - mortgage/charge on a property

loi scrivener – a law protecting French home loan borrowers

lu et approuvé - read and approved – words that often appear on a contract

notaire – legal official charged by state with handling property transactions. This is a uniquely French official in a uniquely French part of the transaction. My notaire was kind, patient, diplomatic and helpful. Notaire work for the government, not for the buyer or the seller. They are key to a successful transaction, so listen carefully to their advice.

permis de construire - planning permission. Any new construction or renovation or extension of a property requires permission from local government. A very frequent comment from sellers and real estate agents is that getting the permission won't be any problem. Do not believe this until you have checked yourself. Even converting an attic to a terrace, a change you cannot see from the street, requires permission. The laws have been simplified, but they're still complex and you should seek professional counsel if you want to make any changes to your property. I found it much easier to just find something that I liked as it is.

plan cadastral – land registry plan, showing boundaries of plots of land and property

prendre l’immeuble vendu dans son état au jour de la prise de possession – where the buyer takes the property ‘in its present condition’

TTC: toutes taxes comprises - all taxes included, referrring not just to sales tax but any tax

TVA: taxe sur la valeur ajoutée - value added tax or VAT

taxe d'habitation – tax on the occupation of a property. One of two local property taxes, with the tax foncière being the higher of the two. These taxes are distributed to your region and to the local communes to pay for things like garbage pick-up, street cleaning, schools and other community facilities. You have to pay them whether or not you live in the house full time. Make sure you ask about the taxes before you sign the compromise de vente.

taxe fonciére - local property tax. The higher of the two taxes. Tax bills usually arrive in August or September and have to be paid by a specific date in October or November. By U.S. standards, these property taxes are very very low, although they vary substantially from regin to region. So, again, check.

testament - will