France

Why France?

France has seen average property price increases of 80 per cent since 1997, and prices in some areas continue to appreciate by approximately 10 per cent annually.

Increased interest in lifestyle properties overseas from UK buyers, as well as more competition from French people looking for a rural retreat make the dream gem of a property to renovate in the countryside harder to find.

Popular property locations in France

France, of all nations, really does have the lot: cultured cities, great beaches, awe-inspiring mountains, rolling hills and meandering rivers. Broadly speaking, the northwest regions of Brittany and Normandy are remote, with rocky bluffs and windswept beaches, while the Côte d’Azur, on the Mediterranean south coast, is incredibly beautiful, with golden sand beaches, ritzy restaurants and million-pound marinas.

Paris

France’s significant business is conducted here, its government and political powerbrokers residing in the northern city.

Much as in any major city, property prices in central areas are expensive.

Central and southwest France

Still further south is the Dordogne, in southwest France. Property in the Loire can be bought for 170,000 euros (£132,000) for a two-bedroom house in good repair. A character period house costs from 400,000 euros (£311,000), depending on condition. In the Dordogne, a picturesque three-bedroom cottage in a pretty village costs around 500,000 euros (£389,000).

Buying a property in France

France’s legal system is very different from the British one, and it is essential to use the services of an independent, English-speaking solicitor.

The notary (notaire) is a mandatory part of the purchase process. The notary is a government official and works for the state, not the buyer or the vendor, although, confusingly, notaries often act as estate agents as well.

Once a sale has been negotiated, an initial legal contract, the compromis de vente, is prepared by the notary and signed by both parties. On signing, the buyer pays a 10 per cent deposit, with the balance due on completion. The various fees and taxes, including transfer tax and the notary’s fees, become due for payment at this point, after which the deed of sale is registered at the Land Registry.

Costs

Several fees and taxes are payable when buying property. Budget to pay 9–13 per cent of the purchase price, excluding a buying fee, payable to the estate agent, which may be applicable in some cases – ask before you proceed. Costs may include:

• Transfer fees: 6–7.5 per cent (less for a new build property)

• Notary fees: 1–1.5 per cent

• Legal fees: 1–1.5 per cent (for the appointment of a solicitor)

• Property registration fee: 0.6 per cent for properties less than five years old, 1 per cent for others

• Surveyor’s fee (optional)

• Mortgage fees (if applicable)

• Foreign exchange costs (if applicable)

• Estate agent’s fees of up to 10 per cent may be applicable when buying

• Finally, don’t forget that there will be costs for registration, VAT, land registry and stamp duty

Mortgages

As in the UK, it is commonplace in France to use a loan (mortgage) to purchase a property. Loan levels of up to 80 per cent of the property value are generally permissible, leaving the buyer to raise a 20 per cent deposit.

Securing finance these days is a relatively straightforward process, given that the buyer has an income and/or owns a property in the UK. Should he be a homeowner, he has the choice to take out a first (or second) mortgage against the UK property to raise the capital to buy the property in France outright.

Euro mortgages

It is increasingly common to take out a mortgage on a property in France in euros rather than sterling, essentially because it is cheaper to do so, since euro mortgages are tied to the rate set by the European Central Bank (ECB), which is currently lower than the Bank of England base rate.

This option is particularly attractive for owners who receive income in euros, for example rental income, as well as making the mortgage repayments in euros – effectively negating the need to transfer sterling to a French bank account (at a cost) to cover the mortgage repayments. Should an owner choose not to let his property, he may well find that the monthly cost of currency exchange and transfer from sterling to euros to pay the mortgage counteracts any saving made by the lower euro mortgage rate.

Taxation: France & UK

A double taxation agreement exists between France and the UK. Therefore, tax is paid in one or other country, not both. Seek specialist financial and tax advice on all matters relating to personal and property purchase transactions.

Income tax

Non-residents may be subject to income tax (impôt sur le revenu) on money earned in France, for example from letting a property. The rate for 2006 is 20 per cent.

French residents are taxed in France if their main income arises in the country, their principal activity is in France, or if France is the country where most of their substantial assets reside. As at 2006, annual income of less than 5,515 euros (approximately £3,748)) is not taxable. Income of 5,516 euros (approximately £3,749) to 65,559 euros (approximately £44,544) is taxed in bands of from 5.5 to 30 per cent. Above £44,545, 40 per cent is payable.

A mechanism known as parts familiales reduces the tax burden. Under this system, the household’s combined taxable income is divided by the number of units (parts).

Other personal taxation

Both residents and non-residents may be liable for capital gains tax (CGT) if they dispose of assets (including property) at a profit. Otherwise, CGT is charged at 16 per cent. Residents additionally pay an 11 per cent ‘social charge’ and eight per cent ‘healthcare charge’ if not exempt.

Both residents and non-residents may be also be liable for a wealth tax on assets (including property) above the value of 750,000 euros (approximately £583,000). The tax rate commences at 0.55 per cent, rising to 1.80 per cent on assets above 15,530,000 euros (approximately £12,075,266).

Inheritance tax may also apply to both residents and non-residents.

Local taxes

Two local property taxes are applicable: taxe foncière and taxe d’habitation. Taxe foncière is payable by the owner and taxe d’habitation by the occupier (for example, the tenant if the property is let). Tax amounts vary from region to region, sometimes quite substantially.

Passports, visas and residency

Passports and visas

British citizens in possession of a valid passport may visit France for up to 90 days. By law, everyone in France is required to carry ID.

Residency

British citizens, as members of an EU country, are entitled to live and work in France and do not require a work permit or visa.

The French economy

France is a country in flux. France’s tax burden remains one of the heaviest in Europe (nearly 50 per cent of GDP in 2005), the general global economic slowdown has helped push its budget deficit above the eurozone\’s three-per-cent-of-GDP limit, and unemployment stands at 10 per cent in a country that has seen great social unrest of late.

France is the second most popular destination with Britons buying a property abroad (Spain is number one).