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Fabulous French Leaseback Properties
No VAT, returns of 4% +, Fully Managed Ski, City and Country Properties
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As international property specialists and as property agents we're always searching the property markets for what we believe represents the very best in terms of investment and lifestyle buys for our clients. The more we work with French Leaseback Properties, the more we like them.
About French Leaseback Investments
We've taken time to investigate fully the concept and the practicalities of the French Leaseback scheme. Here we report on our findings - including the pros and cons of the scheme.
Why buy in France Anyway?
Security and Stability
France is a fellow European country and is politically and economically stable. France's property market is perceived as being secure. A wealth of historical data on the French housing market is available to reinforce the belief that this country can provide both a safe and sustainable return on investment. France's investment property market has remained steady despite the global recession. It has continued to attract investors and lifestyle buyers alike.
It's a Really Good Place to Buy Property
France's property purchase laws, mortgage qualification procedures and bureacratic system for purchasing through a notaire (notary), together with tax incentives (introduced in 2009) for French tax payers, plus the many French leaseback property opportunities now available has certainly created a attractive purchasing environment. Low levels of private debt in the country means that France suffers less from the 'boom-and-bust' cycle. Evidence shows that French property provides a very good basis for aspects of your financial planning. French banks are still lending and investors can and should capitalise on this as 80, 90 or even 100% of the purchase price can be borrowed at low rates (rates typically 1% cheaper than in the UK)
Protection for the Consumer
In France, property investors can clearly see that they are buying in a reliable and long-standing legal system that is there to protect them.
Particularly important for those have never bought property abroad before, France is the ideal place to start - the robust legal process helps protect the buyer from the risks associated with buying property in other emerging markets and helps avoid some of the horror stories seen in the media an internet blog sites.
Not only does France's property legislation protect buyers, strict planning laws mean that there is a much lower likelihood of over development.
What is Leaseback?
Leaseback is a scheme introduced by the French Government over 30 years ago to support good quality and positive development in tourist areas, to maximise occupancy of holiday properties. Basically the investor buys a brand new freehold property and, alongside the purchase signs a commercial lease contract with a property management company - who will rent it out for a pre-determined, renewable period usually 9 or 11 years. In most cases, several weeks personal use by the investor is incorporated into the lease. The management company, highly experienced in the tourist industry, will agree to pay a set amount of rent per annum for the use of the property. This income is index-linked which provides a buffer for the investor against inflation.
The rental income generated by the property is sufficient to cover all of the running costs of the property plus some, or all, of the mortgage (depending on the size and type of mortgage taken). Finance packages for leaseback purchases are attractive, with LTV (loan to value ) of 80-100% of the purchase price.
Current examples of mortgage availability are:
4.3% over 25 years LTV 100% The rate is capped +1/-1
4.05 % over 30 years LTV 100% Variable rate. Fixed 3 months then Euribor capped +1.5%
3 % over 30 years 80% LTV Fixed one year then Euribor 1.70%, capped at 4.45%
2.6% over 20 years 80% LTV Variable rate. Euribor 3 months +1.3%
Properties offered as leaseback investments can be either off-plan, new-build or renovated ( VAT exemption rates can vary). This means that either way, investors benefit from all of the advantages of having a 'new' property, be it recently constructed or renovated. The furnishings and fittings will also match the 'new' status of the property, with developers insisting on refurbishment between lease (not rental) periods, to ensure quality of provision (refurbishment costs are usually the responsibility of the owner!).
Different to the majority of new properties in France, leaseback investments come 'key ready', with kitchens and furniture already in situ and usually included in the price. At the end of the lease period, the property will be returned to the owner, in perfect condition. In many cases, leases incorporate the right for the management company to renew the lease period for a further 9 years, great news for buyers who are looking for longer-term income.
Why Buy Leaseback Property in France?
France is the number one tourist destination in the world – hence there is unlikely to be a shortage of visitors to your property.
The government wants to keep it that way and in order to keep up with the demand for tourist accommodation the Leaseback system was introduced. This enables developers around the country to build rental properties, and then offer them for sale completely free of VAT - because this is pre - financed by the developer, who claims it back from the French Government (a whopping 19.6% in France). For example, if the price of your apartment with VAT is €100,000, the VAT saving means that you only pay €83,612. That means that you buy at €16,388 below market value. In effect then, you've got yourself €16,388 discount or instant equity. Finance of up to 100% of the purchase price is also offered, subject to the buyer's status. All in all - a good medium to long-term investment.
Leaseback provides an opportunity for long-term ownership that can continue after the mortgage has been paid in full. An alternative investment strategy is to benefit from anticipated capital growth by selling the property during the term of the mortgage. This is where location is important - for example a top ski destination or Cannes or St Tropez will always, always sell.
If you'd like to know more, please call or email us for a no-obligation chat. Or you can browse our property selection first.
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