There has always been great appeal
for Brits in owning a property in France either as a second home to use for
long periods of the year or as a holiday home that they might also rent out
when they are not using it themselves. The allure has not just been great food
and wine but also lower house prices than in many parts of the UK. Now those
attractions are combined with a very low rate of interest for a loan so it
could be the perfect time to buy property in France.
French interest rates are now at
levels not seen since the Second World War so it is cheaper than it has been
for many, many years to take out a mortgage for a dream holiday home in France.
Some long-term fixed rate deals are available at under 3.5 per cent. However,
there is more to buying property than low interest rates and property prices in
the country, never subject to the huge rises seen in the UK, are nevertheless
unstable right now. Changes to the French tax regime have meant that the cost
of owning a property has risen significantly.
So, is now a good time to buy property
in France?
There has been much fierce
competition recently between lenders in France to attract borrowers resident in
the country and this has had the effect of pushing mortgage rates to rock
bottom. These new lower rates are also available to non-residents who wish to
buy there and it is possible to find 20 year fixed rate deals at less than 3.5
per cent due solely to the inter-bank competition. It is not surprising then
that many investors are deciding to invest in French property especially if they
can fix at an extremely competitive rate for the lifetime of the mortgage.
The French mortgage market is
markedly different from that in the UK. Most French home loans are taken out on
a long term basis, often for 20 years, unlike mortgage products in the UK that
typically run for 2, 3 or five years before reverting to a standard variable
rate. The reason for the difference is partly to do with mortgage registration
tax which can add a significant sum to the loan amount.
If you are considering buying property
in France make sure you understand the tax regime before you buy and be aware
that many potential buyers are concerned about property prices and tax issues.
Property prices have fallen by up to 10 per cent in some parts of France so
where you buy is also a factor to consider.
A recent change to the tax regime
also means foreign owners of French homes now face higher capital gains taxes
when they sell due to the addition of a 15.5 per cent social charge. French
capital gains tax can be offset against the British capital gains tax rate of
28 per cent, but the new 15.5 per cent social charge cannot be offset,
effectively meaning sellers will pay 15.5 per cent more in taxes when they
sell.
So while large mortgages are
extremely competitive, all the normal caveats about buying a property abroad
apply according to Islay Robinson, a London mortgage adviser. Any property
purchase overseas should be considered a medium to long term investment and
potential purchasers would be well-advised to speak to a French property
specialist to assess the level of taxes and charges that apply to home
ownership.
Source