House prices in France rose by 4.3% (1.8% when adjusted for inflation) during 2011, according to the National Institute for Statistical and Economic Studies (INSEE).
However rougher weather lies ahead: nationally French property prices could drop by 5% to 6% in 2012, forecasts Credit Agricole, which also predicts an 8% decline in sales. The pace of house price rises softened in the latest quarter.
Paris continues strong, with apartment prices up 14.8% y-o-y (12% in real terms) to €8,390 per square meter at end 2011, according to Notaires - INSEE.
Around Paris:
In France as a whole, house prices rose strongly from Q1 to Q3 2011, according to the National Association of Real Estate Agents in France (FNAIM), but again, the latest quarter was weak.
Compared to a year earlier, the average price of all dwellings was up 7.1% in Q3 2011 (4.8% in real terms), at €2,626 per square metre. However, prices rose only 1.04% in the last quarter.
Detached house (maisons) average prices fell 0.96% in Q3 2011 (0.91% in real terms), after 4.2% and 2.4% price rises the previous two quarters.
Some French regions are weak, exemplified by the 4.6% average price fall in Brittany during 2011.
However rougher weather lies ahead: nationally French property prices could drop by 5% to 6% in 2012, forecasts Credit Agricole, which also predicts an 8% decline in sales. The pace of house price rises softened in the latest quarter.
Paris continues strong, with apartment prices up 14.8% y-o-y (12% in real terms) to €8,390 per square meter at end 2011, according to Notaires - INSEE.
Around Paris:
- In the Ile-de-France, where Paris is located, house prices rose 10.6% in 2011, to €5,550 per sq. m.
- In the Petite Couronne (Little Ring), house prices rose 8.8%%, to €4,440 per sq. m..
- In the Grande Couronne (Large Ring) average prices were up 5%, to €3,140 per sq. m.
In France as a whole, house prices rose strongly from Q1 to Q3 2011, according to the National Association of Real Estate Agents in France (FNAIM), but again, the latest quarter was weak.
Compared to a year earlier, the average price of all dwellings was up 7.1% in Q3 2011 (4.8% in real terms), at €2,626 per square metre. However, prices rose only 1.04% in the last quarter.
Detached house (maisons) average prices fell 0.96% in Q3 2011 (0.91% in real terms), after 4.2% and 2.4% price rises the previous two quarters.
Some French regions are weak, exemplified by the 4.6% average price fall in Brittany during 2011.
Analysis of France Residential Property Market »
RENTAL YIELDS
Last Updated: Jul 07, 2011
Gross rental yields on rental property in central Paris of around 3.5% are typical, regardless of apartment size. As prices have risen, rents have not kept pace.
These are quite disappointing returns for investors. However, they are not unlike the rental returns on properties in other capital cities in Europe. This is an epoch of low yields and high prices, which the housing crisis and its aftermath has done almost nothing to dent.
These are quite disappointing returns for investors. However, they are not unlike the rental returns on properties in other capital cities in Europe. This is an epoch of low yields and high prices, which the housing crisis and its aftermath has done almost nothing to dent.
TAXES AND COSTS
Last Updated: Jun 15, 2010
Rental Income: The effective rate of tax on gross rental income accruing to non-resident foreigners is likely to be around 10.00% on an income of €1,500/month, according to calculations provided by Anthony & Cie.
Capital Gains: EU residents and residents of France now pay 16% on the net gain, after deduction of acquisition and improvement costs. Non-residents of an EU country pay capital gains tax at a rate of 33.3%, subject to any applicable double tax treaty.
Inheritance: French private international law uses the standard double rule on inheritance: the law of the deceased’s domicile applies to moveable assets, and the law of the location of the property applies to immoveable assets.
Residents: French residents are taxed on their global income at progressive rates, from 5.5% to 40%.
Capital Gains: EU residents and residents of France now pay 16% on the net gain, after deduction of acquisition and improvement costs. Non-residents of an EU country pay capital gains tax at a rate of 33.3%, subject to any applicable double tax treaty.
Inheritance: French private international law uses the standard double rule on inheritance: the law of the deceased’s domicile applies to moveable assets, and the law of the location of the property applies to immoveable assets.
Residents: French residents are taxed on their global income at progressive rates, from 5.5% to 40%.
BUYING GUIDE
Last Updated: Mar 26, 2007
Round-trip transaction costs in France can range from 11% to 19.35%. New properties have the highest costs because of the 19.6% VAT but this is slightly offset by a lower registration fee. Real estate agent fees range from 4% to 10% typically split between buyer & seller.
LANDLORD AND TENANT
Last Updated: May 25, 2006
French tenancy law is very pro-tenant.
Rent: Though the initial rent can be freely agreed, the rent can only be revised once a year, and not more than the increase in the (new) INSEE rental index. In combination with a highly restrictive contract structure, this means that rentals of old apartments have tended to drag well behind new rentals and prices.
Tenant Security: An unfurnished property contract has, as a minimum, a three-year term, though furnished property contracts may be for one year. In both cases, even when the contract ends, the owner can only recover the property if he or a family member intends to live there, or he intends to sell. In addition, eviction through the legal system takes a long time.
Rent: Though the initial rent can be freely agreed, the rent can only be revised once a year, and not more than the increase in the (new) INSEE rental index. In combination with a highly restrictive contract structure, this means that rentals of old apartments have tended to drag well behind new rentals and prices.
Tenant Security: An unfurnished property contract has, as a minimum, a three-year term, though furnished property contracts may be for one year. In both cases, even when the contract ends, the owner can only recover the property if he or a family member intends to live there, or he intends to sell. In addition, eviction through the legal system takes a long time.
ECONOMIC GROWTH
Last Updated: Apr 03, 2012
France’s credit rating downgrade
The second-biggest economy in Europe, France enjoyed the coveted triple-A credit rating status from 1975 until January 13, 2012, when Standard & Poor’s (S&P) downgraded it to AA+ status, alongside 8 other eurozone countries.
According to S&P, the downgrade was due to the insufficient policy measures made by the bloc’s leaders in containing the sovereign debt crisis. S&P also changed France’s rating outlook to negative, indicating that a further downgrade may occur in 2012.
The rating cut is expected to have a limited impact on borrowing costs since markets have already anticipated the downgrade through the increasing French risk premium over German Bunds.
However, this is a major setback for President Nicolas Sarkozy’s chances of being re-elected in the incoming May elections.
Though 2011 was tough for France due to the worsening euro zone crisis, the economy grew by 1.7%, better than the 1.5% growth in 2010. This followed a 2.5% decline in 2009, France’s sharpest recession since World War II. However France’s recent GDP quarterly growth of only 0.2% in Q4 2011 suggests the economy is slowing.
The strength of French unions and lack of labour market flexibility affects France’s competitiveness. France’s generous unemployment benefits have led to a structurally high unemployment rate, at 9.4%at the end of 2011.
Amid the flagging consumer confidence, France’s CPI increased 2.3% y-o-y in Q4 2011, higher than ECB’s 2% limit. The increase was caused by the seasonal increase of prices of services and high energy prices.
According to S&P, the downgrade was due to the insufficient policy measures made by the bloc’s leaders in containing the sovereign debt crisis. S&P also changed France’s rating outlook to negative, indicating that a further downgrade may occur in 2012.
The rating cut is expected to have a limited impact on borrowing costs since markets have already anticipated the downgrade through the increasing French risk premium over German Bunds.
However, this is a major setback for President Nicolas Sarkozy’s chances of being re-elected in the incoming May elections.
Though 2011 was tough for France due to the worsening euro zone crisis, the economy grew by 1.7%, better than the 1.5% growth in 2010. This followed a 2.5% decline in 2009, France’s sharpest recession since World War II. However France’s recent GDP quarterly growth of only 0.2% in Q4 2011 suggests the economy is slowing.
The strength of French unions and lack of labour market flexibility affects France’s competitiveness. France’s generous unemployment benefits have led to a structurally high unemployment rate, at 9.4%at the end of 2011.
Amid the flagging consumer confidence, France’s CPI increased 2.3% y-o-y in Q4 2011, higher than ECB’s 2% limit. The increase was caused by the seasonal increase of prices of services and high energy prices.
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