Is it still worth buying in France?

Is it still worth buying a property in France? Yes, it is, says Deborah Vaysse…

According to statistics, France is (and has been since 1990) the most popular world destination for international tourists. And for good reason; France has a lot to offer to holidaymakers. It’s history has made it famous, along with its literature, fine arts, architecture, culture, and fine wine and gastronomy.

France is also about grandiose landscapes: the turquoise waters of the Côte d’Azur, the creeks of Marseille, the Gorges du Verdon, the snow-capped peaks of the French Alps, the volcanoes of Auvergne, the waterfalls of Jura, the gardens of Versailles, the Dune du Pilat, the cliffs of Etretat… the list goes on!

Since Brexit I hear a lot of “I can now only stay in France for a maximum of 90 days”, which is actually a wrong assumption. The rules state that UK nationals wishing to visit France for a stay of 90 days or less within a 180-day period do not need a visa. It is therefore possible to spend 90 days in France, then 90 days elsewhere and come back for 90 days, which means Brits can spend up to 180 days in France per year without a visa.

UK nationals should also rest assured that they will still be able to settle in France in 2023 as it is possible to stay for more than 90 days at a time if you apply for a visa.

So Brexit should not prevent UK nationals from buying their dream French property, which they may not be able to afford in the UK. Given the proximity to Britain and the ease of travelling between the two countries, and as the cost of living is slightly cheaper in France and the property market less tense, France is a dream destination for second home owners or property investors. A villa in the south of France with a pool for less than £300,000!

I always advise my clients to take a broad view of their project. Why are you buying a property abroad? Is it going to be your second home only, a rental investment, a hybrid project? Will you plan to resell the property, do you expect to make a gain or would you like your loved ones to inherit the property upon your death? You need to plan ahead to avoid unpleasant surprises- and also to benefit from the advantages. If the aim is to invest in a rental property, France as the top tourist destination in the world, is therefore a good bet. Location is a key factor: proximity to public transport, airports, amenities etc. The Alps, Côte d’Azur, Atlantic and north coast (Bordeaux, Biarritz, Mont-St-Michel), as well as Paris – all these areas are popular with investors because they are the most touristy regions of France. But as the most popular, they are also the most expensive: the theory of supply and demand. In contrast, there are cheap houses deep in the countryside that wouldn’t be suitable for seasonal rental but could still be considered for long-term rental which can ensure a stable income for the investor.

France has a reputation of being one of the most taxed countries in the world. It is true that on paper there are many compulsory levies: housing tax (taxe d’habitation), property tax (taxe foncière) for owners of second homes, income tax and social charges for those who rent, and even business property tax for those who offer furnished rentals. In reality though, many investors avoid a big tax bill by benefiting from the many tax credits available.

For investors who rent their property furnished, or on a seasonal basis, there are different tax regimes. One allows you to deduct the charges and expenses incurred on the property from property income. Thus, if the amount of the charges is higher than the rental income, this situation generates a deficit which can be deducted allowing the amount of the income tax to be reduced. The other regime allows investors who have already written off their property or who do not have many expenses to deduct, to deduct a fixed abatement of 50% (up to 71% for classified tourist properties) on their property income.

For investors who want to be spared the hassle of managing seasonal lets themselves, a leaseback scheme or résidence de tourisme may be of interest. The property is managed by a third party; owners sign a commercial lease with the operator, which sets out the terms and conditions of the rental. The commercial lease commits the operator to finding tenants, maintaining the property and guaranteeing the payment of rent to the investor.

The owner, for his part, benefits from a right of occupation in a tourist residence for a few weeks a year, according to a pre-defined schedule. The purchase price is generally well below the market rate, making it an attractive investment. The investors benefit from a secure investment, which is hassle- free and tax efficient.

Be careful, however, to target a reputable management company. Investors should also be aware that the minimum term of a French lease for a résidence de tourisme is nine years and if the owner wishes to take back the property, he must pay an eviction indemnity to the management company to compensate the losses and costs incurred (In general eviction indemnity = two and three years’ rental).

Good to know: As a double taxation agreement exists between France and the UK, you don’t pay tax twice on the same income.

A property purchase is an important and far-reaching commitment, especially when you buy in a country that does not have the same rules in terms of sales, taxation, litigation and inheritance law. If only 21 miles separate France and the UK, in terms of law they are a world apart. There are different and new concepts that need to be understood before embarking on your French property adventure.

For example, testamentary freedom exists in the UK while France has the forced heirship system. Some people think they will be able to dispose of their French property the way they wish upon their death… well, not exactly!

To sum up, it is possible to purchase the second home of your dreams and also make a good rental investment in France without being overcharged, but you still need to be assisted by professionals who can give you the best advice based on your profile and your wishes.

It should be noted that in France, notaires are not independent advisors, they are public officers appointed by the minister of justice to act on behalf of the French state during property transactions. It should also be noted that estate agents are not legal advisors either. In France, legal advice is reserved for avocats, who have the monopoly.

It is therefore advisable to seek independent advice from a French law expert who will navigate you through difficulties and answer your questions, and also help with managing your taxes and planning your property resale or estate in advance so you can purchase your French property with peace of mind.

Deborah Vaysse is an avocat at Furley Page, a legal team made up of French avocats and UK solicitors and tax experts.

[email protected]

furleypage.co.uk

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