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MAY 2012 |www.opp.org.uk WORDS | Clare Nessling


BUSINESS


Developer profi leMORTGAGE OUTLOOK | 23 France takes it all


There’s good news if you have clients who are thinking of buying property in France. Reductions in mortgage rates mean that it’s now even more affordable. The 3-month Euribor, used to price variable rate mortgages, has come down from 1.58% in November to 0.74%, and many French lenders have cut their rates to 3% to 4%. Clare Nessling reports.


rance is a long-time hot spot for overseas property buyers looking to invest abroad. Accessible, safe and familiar, France offers everything today’s buyer is looking for, including a defi antly dynamic property market. It also accounts for more than a


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third (37 per cent) of the mortgage enquiries we receive at my company, Conti, and the volumes are up by 24 per cent since 2008. The boom shows no signs of changing.


The country has become an increasingly attractive investment option, not least because of low interest rates, easy access from northern Europe, and good rental yields. And it has also done well because of some truly mouth-watering property prices as the market slows down, which also means that there are many motivated vendors who are willing to accept lower offers.


And because the euro has become Top tips for clients taking out a French mortgage:


Obtain an approval in principle This will confirm your client can obtain the necessary funds before signing any dotted line and prove to sellers that they’re a serious buyer.


Consider exchange rate fluctuations We generally recommend that an overseas mortgage and the income used to service the mortgage repayments are in the same currency, thus avoiding exchange rate issues.


Open a French bank account To receive their French mortgage, your client will need to open a French bank account, from which their mortgage payments can be debited.


Factor in additional costs Bear in mind that bills don’t end at the asking price. Lawyer’s fees, local and national taxes, insurance, and so on, can often add at least a further 10 per cent to the cost of your client’s acquisition.


Seek professional advice Your client should take independent advice from an English-speaking lawyer who is not connected to their seller, estate agent or property developer.


weaker against its competitors, clients can get more for their money at the moment.


The French mortgage market has remained very calm throughout the global downturn, primarily due to its fi nancial system having been more cautious in the past.


French people tend to buy property to live in, and not just as an investment. Also, because the country doesn’t have a large number of high-risk borrowers, there hasn’t been a dramatic increase in property supply, and this has kept the market pretty stable.


According to the Knight Frank Global House Price Index, France enjoyed a 4.3 per cent annual increase in property prices for the last three months of 2011, compared with the same period the previous year. Although some lenders tightened up their lending criteria last year, due to the eurozone debt crisis, the country still offers the widest range of fi nance


options and best available rates in Europe. And as it’s in a relatively secure situation, loan-to-value ratios are still high and it would be quite normal for clients to borrow up to 70% of the value of a property with an interest- only mortgage and up to 85% with a repayment mortgage.


Regional hot spots


In recent years, the most popular regions have been Provence-Alpes- Côte d’Azur (PACA) and Rhône-Alpes. And while these are still a big hit, it’s Aquitaine which has experienced the most growth in interest since this time last year, with mortgages for the region up by 40 per cent.


Over the last few months alone, it has accounted for almost a third of our mortgage completions.


The Dordogne in particular has always been a favourite part of this region, especially as it has a long- established ex-pat community, a great climate, a huge range of property types, and is well served by a number of airports. And although it has historically carried a higher price tag, there are lots of good deals around at the moment. In these challenging economic times, it seems that investors are shunning the emerging property markets where we saw a fl urry of activity just a few years ago, and putting their trust in the more established destinations, especially those with history of providing good rental returns. This sort of cautious thinking is defi nitely driving buyers to France, where a well-chosen investment could generate a very attractive and secure return over the long term.


Quick off the mark with fi nance If you’ve any clients who are thinking of buying a home in France, whether as a permanent residence or as a holiday bolt-hole, there are many reasons why they should get their fi nances sorted out


Clare Nessling is Director of Conti, the overseas mortgage specialist. For more information, please go to: http://www.mortgagesoverseas.com


as early as possible, even if they’ve not started looking at properties. They need to give themselves time to research the mortgage market, so they can fi nd the best possible deals and decide on things like whether a euro or a home currency mortgage would be most suitable. Arranging the fi nancial side of things upfront also means they’ll know how much they can afford, and this is fundamentally important. An ‘Approval in Principle’ (AIP), will do just that – it will tell them exactly how much they can borrow and what price range they can realistically consider. It also proves that they’re a serious buyer and could help with price negotiations. Also ... it costs nothing.


The application process for a French mortgage can take anything from six weeks to several months – another reason why clients should start the ball rolling as early as possible. It takes time to get all the necessary documents together, and they must be prepared for some strict deadlines attached to the mortgage and general property purchase.


Last word


France really does offer the long- term investor a wealth of opportunity. But any clients considering an overseas property purchase must take professional advice before committing to anything. And fi nally, I would advise them to be brave when it comes to negotiating price. With the economic climate as it is, people are keener to sell and therefore more likely to be receptive to offers lower than the asking price. It’s a buyer’s market.


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