Assetz® News - France stays steady

France stays steady

3rd September 2008 |

Yesterday's Knight Frank survey of property prices around the world certainly made for interesting reading as the general dip in the increase in property prices from an annualised 6.1 per cent in the first quarter of 2008 to 4.8 per cent in the second did little to tell the whole story. While some markets have struggled and others (like Cyprus) are booming, some have carried on steadily growing.

France is a case in point. Although it is no longer matching the 6.8 per cent annual increase recorded in the second quarter of 2007, it was still growing by 3.2 per cent a year later. Such a rate of increase may not be the most enticing number for an investor keen on high growth and imminent boom, but the country may be able to offer something that is more solid, stable and reliable in the long run than most markets.

According to VEF, France is equipped with many advantages in this regard. The French property specialist firm stated this week that the country's property market operates in a way that mitigates against a boom-bust cycle. The sort of problems that have been seen in Spain or the US could not happen there, it states, because of higher fees and stricter lending criteria, which ensure that "negative equity problems and speculative buying" are problems only seen in other countries.

Yet, VEF states, the property market in the country offers more than just an avoidance of bust. The average price is stated to be 60 per cent of those in Britain and 80 per cent of those in Spain, while at the same time it offers possible buy-to-let returns of six per cent or more.

With these advantages, France clearly has something different to offer, even if it isn't matching the skyrocketing prices some countries are still experiencing.

For those who do buy in France for the long run, the issues may therefore be different ones. There is no longer run than until death and for those who hold on to properties for that long the issue of inheritance tax is bound to arise. This is where it becomes necessary to seek legal advice to make sure the interests of partners, children and anyone else the investor hopes to benefit from a property in France are best served.

An example of where this can avoid complication was given recently by the Daily Telegraph, which focused on the case of British buyers Sheila and Ian Holmes, who both have children from previous marriages. It notes that while arrangements over inheritance could ensure the surviving partner get the whole house in Britain, in France the law insists that biological children get their share.

Marcel van Peteghen, of Anglo French Lawyers, told the paper it was possible to set up a trust that could effectively give the surviving partner ownership of the whole house. But the paper notes that the Notaire - the legal official who is involved in housing transactions - may have a different interpretation of this law and thus it is important to ensure such people buy into the plan to avoid the possibility of things still going awry.

That such different laws and potential complications exist show why for anyone buying overseas, taking legal advice on all aspects of a transaction is very important.