LanguageFrench mortgage and market outlook
Economy: Following the victory by Emmanuel Macron in the French elections in France a few weeks ago we have seen a surge in interest in French property from international buyers buoyed by his pro-business economic policies and stable perspective. One of his biggest announcements was that he is reducing corporation tax from 33% to just 25% bringing it below the European average (weighted by GDP). The last two quarters (Q4 2016 and Q1 2017) have seen GDP growth in France of 0.5% and 0.4% respectively which is very encouraging and with a new pro-business leader like Macron in power we only expect this to improve.
Property: Since February 2015 the volume of transactions in France has steadily increased and at the end of February 2017 transactions over the preceding 12 months were at 867,000 compared to 805,000 in the 12 months before that (source : Note de conjoncture immobilière des Notaires de France n°35 Avril 2017). This increase has also affected prices which rose by 1.7% in 2016 (l’indice Notaires de France-Insee) and according to the Crédit Foncier/CSA barometer 74% of property professionals in France are optimistic about the property market in 2017.
Mortgages: Mortgage interest rates are still the best they have been since WW2 and with rates from as little as 1.85% and the ability to fix your mortgage at an incredibly low rate for up to 25 years makes this an incredible opportunity for people who are able to qualify. Even for the most risk averse investor that would only invest in an apartment in central Paris yielding 3% NET you would still be making money for the next 25 years knowing that rental prices steadily increase while your mortgage payments stay the same and there is clear daylight between the two. These incredibly low rates are one of the reasons that the property market in France is steadily on the increase and below we have summarised the mortgage deals we can offer our clients:
|
Mortgage Type |
Interest rate |
Max LTV |
Duration |
|
Variable rate |
From 1.85% |
80% |
Up to 25 years |
|
Fixed rate |
From 1.95% |
80% |
Up to 25 years |
|
Interest only |
From 2.1% |
80% |
Up to 15 years |
Currency fluctuation mitigation: If you are looking to rent out your property a reasonable amount of time you should be able to cover your mortgage payments with your rental income. As both are in Euros you mitigate any currency risk and as you only need a 20% deposit if you take an 80% LTV mortgage so your currency risk is only on that 20% so even if you feel that Sterling will improve in 2 years’ time (which it may well not) then the recent depreciation in Sterling of 10% only has a real net effect on your cash invested of about 2%. This is more than off-set by the gains to be made from such historically low mortgage interest rates.
Brexit: The dust has to settle with regard to the future relationship between the EU and the UK however what we do know is that Brexit only affects people who plan to live and/or work in France and even these people should still be allowed to continue as before. For people who plan to invest or only use their properties up to 6 months per year nothing will change and in fact having a Euro denominated investment would probably be a good idea just in terms of spreading the risk in case the UK doesn’t come out of negotiations with the deal it wants.
In short we believe that with the European elections having had a favourable outcome and with new economic policies in France, coupled with steady growth and competitive property prices now is looking like a very good time to invest in France.
