Assetz® News - French property - an exercise for the savvy investor

French property - an exercise for the savvy investor

4th June 2007 |

Investing in property in France is an exercise in good research and taking one's time, various experts on the market in the country have said.

This applies to a number of issues, whether this be finding the right property, seeking out a bargain or ensuring there are no technical problems or hidden pitfalls. There is also the small matter of watching out for the taxman, since there are breaks available and also the possibility of new legislation.

Writing for the Record in New Jersey, US, expert Shannon Roxborough advises her readers to look around for bargains, since much of France can be expensive, but there are up-and-coming areas where the prices are low. She cites Paris apartment owner Joanne Clark, who says: "You can spend a lot here, but if you look in up-and-coming neighborhoods like the 10th, 18th and 19th arrondissements, you'll be surprised at what you can get for your money."

Similarly, Ms Roxborough writes that the Dordogne is a cheaper alternative for those looking to invest in the country. Writing for her American audience (although the advice is applicable to any overseas investor), she notes that many Britons have already arrived and prices in the region are going up, but states there are still bargains around. She quotes the advice of the author of The Grown Up's Guide to Living in France, Rosanne Knorr, who recommends taking three months over the process and hiring a government official, called a notary, to handle official documents and check the house is in good order.

Another area where people need to be savvy is the tax system. In France there are opportunities for tax breaks. One of these is the government leaseback incentive, which refunds VAT to holiday home buyers who lease them back to management agents. The payback is 19.5 per cent.

Assetz has launched a new scheme for such investors, which it states has more flexibility when it comes to the use of the property than existing schemes. Managing director Stuart Law said in the announcement: "Investors can use the property as much as they like and sell on after five years free of the leaseback contract, taking the capital profits." He stated this contrasts with the tighter restrictions on how people could use their properties under the old schemes.

Getting a flexible tax break on a holiday property is certainly one attraction for investors in French property. Others, looking to the longer term, may wonder about the question of inheritance tax (IHT).

Writing in answer to a reader's question on the subject, Sunday Telegraph money editor Liz Dolan noted that there is relief on IHT under a double taxation treaty between Britain and France which uses tax credits to offset any bills and noted that new president Nicholas Sarkozy has vowed to scrap the tax for all but the very rich.

Ms Dolan questioned when or even if this will occur, "politicians' promises being what they are", but Mr Sarkozy's pledge has a lot to do with his plans to encourage home ownership in France. If he is to make any serious attempt to follow through this key policy aim, not to mention if he is to live up to his nickname of The French Margaret Thatcher, changes in IHT could be a key way of trying to achieve his desire of seeing France changed into a country of property owners.

Whatever does occur, investors will be wise to keep a look out for the opportunities that may arise from any legislative and fiscal changes to this and other housing-related policies in France.