Assetz® News - New build market growing in France

New build market growing in France

25th January 2006 |

A new report has found that there was an increase in demand for new build houses and apartments in France last year.

In its annual report, VEF states that new build properties are gradually stealing a greater share of the market from resale properties. Last year, the company sold 47 per cent more new build properties than it did in 2004, representing a definite shift in buyer choice.

A particular increase was also observed in the number of people buying new build leaseback houses, corroborating the suggestion from Stuart Law, managing director of Assetz, that UK residents will be attracted to this almost hassle-free investment opportunity.

"Investors can now purchase a nine or ten-year guaranteed rental property using an interest-only mortgage," said Mr Law.

"This means that even if they use the property for a few weeks a year and get a low four per cent yield as the rent guarantee for the rest of the year, the mortgage cost is still the same or less than the rental income, making it effectively a free holiday home," he added.

Despite the sudden surge in interest in leaseback schemes, VEF also found that there was continued interest in new build homes that are let out under the owner's own terms. Recording a growth of 42 per cent in this market last year, this still only represents a small part of the overall market, but more and more investors are clearly deciding that they want to take a hands-on approach to their property investments.

Mr Law has pointed to potential growth in the Languedoc region of France on a number of occasions and his advice is backed up by the annual report from VEF. While Paris has seen quite modest house price increases during the last 12 months, Languedoc has proved to be one of the most lucrative investment spots, with leaseback and buy-to-let properties equally profitable in the area.

Interestingly, the biggest increases have been observed at the lower end of the market, with properties valued at less than €100,000 seeing the biggest percentage rises.

VEF has also found that 41 per cent of its clients decided to take a French mortgage last year, which reflects a 23 per cent increase on the figure from 2004. A significant 26 per cent of these used the terms of the French short-term mortgage to finance their house purchases, as many waited for house sales back in the UK.

Yet again, the Cote d'Azur was one of the most successful investment locations in France, recording a higher increase in the number of sales than any other area within the country. Mr Law has previously identified the Cote d'Azur as an ideal location for leaseback investment, with the whole leaseback scheme originally introduced to promote tourism in areas including the Cote d'Azur and the Alps.

One of the most enlightening findings from the VEF report is that foreign investors are actually forking out less for property in France than French nationals are paying. Where a UK investor can expect to pay an average of €152,635 for a property, French buyers are looking at a figure closer to €165,500.

With growth throughout the French property market averaging at around 10.9 per cent last year, France remains one of the most popular countries for second-home purchases and investment projects. Most experts are expecting 2006 to see similar growth across the country and with the popularity of new build properties soaring, it is likely that a significant number of UK investors will again look to France next year.