In short, the answer is now!
At Home Hunts, we are finding that clients are taking advantage of this unique time in the French housing market to find their dream home, in their dream location at a dream price. Lower prices already make the prospect of buying French property interesting, but combined with low interest rates, advantageous exchange rates and now also a reduction of Capital Gains Tax for foreign sellers;the French real estate market is offering attractive deals that were simply not possible before.
When Home Hunts, the award winning property specialists, analysed sales data in order to produce its spring 2015 Inside France report– a report dedicated to real estate insights in France, a rise in enquiries and transactions showed that buyers who were waiting for an optimal buying opportunity are now taking action.
On 11th March 2015, the pound reached a more-than seven year high against the euro, a day after the European Central Bank (ECB) began its government bond buying programme.Sterling rose 1% to hit €1.40 for the first time since December 2007. This means UK holidaymakers to the eurozone will have just over 15% more spending power than a year ago and bargains on a dream home in the sun can be found.
Capital Gains Tax Reduction
Capital Gains Tax has recently been reduced by almost 50% effectively in France for foreign sellers. The European Court of Justice has, over the past 10 days, ruled that social charges on Capital Gains Tax for second homes from non-French residents is being eliminated. French residents who sell their second homes in France pay 19% CGT plus 15.5% social charges but this extra 15.5% social charge has now been scrapped for non-resident owners; which nearly cuts the potential tax bill in half when selling a French holiday home. This comes as a huge relief to many and is really helping the French property market to gain momentum.
The 19% capital gains tax for non-resident owners is subject to a certain number of discounts, depending on how long you have owned the property. After the first 5 years of ownership the charge is reduced by 6% per year up until years 21, when 4% remains. This final amount is discounted at the end of the following year, so after the 22nd year of ownership for non-French residents, no capital gains tax is due at all.
Favourable FX Rates
Adam Bobroff, Director of Foreign Exchange at the Foremost Currency Group, says that many of the FX pairs have moved by over 10% in the favour of an overseas buyer in the past year alone and that GBP/EUR is at the best level in almost six years, having gained 12% since the summer of 2013.
“This means your dream home in the sun, based on €1,000,000, is a significant £100,000 cheaper now,” he says. “It’s not just the Brits that have seen a huge benefit from the exchange rate fluctuation over the past year, Americans have gained 16%, Australians will find their purchase to be 11% cheaper since the start of 2014, along with Canadians seeing similar gains, and the Scandinavians have seen smaller savings at up to 2%.”
Euro Interest Rates Lowest Since 1999
“The Eurozone interest rates are now the lowest they have been since the euro was introduced in 1999,” says Tim Yates of Spectrum IFA, explaining that the reasons behind this are twofold. “The Euribor 3 month – the interbank rate that most variable rate mortgages are linked to – reached its historical high of 5.3% at the beginning of October 2008, and is now down to 0.08%,” says Yates.
However, as the Euribor has come down the banks have taken the opportunity to increase their margins. “Six years ago a typical margin would have been 1%, now it is 2%,” he says. “Interest rates have therefore come down from 6.3% in 2008 to as low as 2.1% today.”
In terms of reduced outgoings, he explains that the owner of a house bought with an €800,000 twenty year repayment mortgage could currently benefit from a monthly saving of almost €1,800.
The Year of the Property Deal
In terms of what lies ahead for the French market; this window of opportunity is expected to last for a few months yet. Interest rates should remain low for a little while and the pound is not predicted to gain too much strength in the next three to six months. “Euro buyers should consider taking advantage of what is a near six-year EUR/GBP high,” says Bobroff.
“France has always offered stable and secure real estate opportunities with Paris remaining one of the most secure and attractive cities for property investment in the world,” says Swannie. “But the current market conditions mean that buyers can, at the moment, pick up a dream property at a dream price.”
Properties which sell have either been put on the market very recently and aggressively priced to attract buyer attention, or are those where the owner needs to sell and is willing to be flexible.
“If owners are not willing to take an offer then their property will sit on the market for a long time,” says Tim Swannie, Director of Home Hunts. “Vendors who are willing to work with a buyer on price are making the sales and therefore also able to broker an interesting deal on the property they wish to buy.”