French building industry bounces back

New data for 2008 and 2009 shows that, despite the difficult current climate, the French property market is continuing to strengthen under Sarkozy’s investor-friendly governance.

Laws introduced by Sarkozy, which support broader home ownership, have been a major driver. From the beginning of 2009, France has offered certain homeowners zero-interest loans of up to €30,000. Meanwhile, the Loi Bouvard pertaining to tourism property, extends the original Loi Scellier (on unfurnished property) to sale and leasebacks so that residents can offset 25% of the cost of buying a residential property against their personal income tax, up to a maximum of €75,000 on a €300,000 property.

These measures have helped to shore up the construction industry in France and keep both supply and demand steady when other property markets have crashed. Pierre & Vacances Property Investments (P&V), says it has defied international trends, bringing in sales of €100 million in the last six months of 2008, with a further €150 million generated in the six weeks following the introduction of this law in April.

Nick Leach, P&V head of business development UK and Ireland, says: “These laws have incentivised developers to build again, especially because the tax benefits apply for properties delivered between now and 2012.

“There has been a definite increase in supply and demand for French leaseback properties as confidence returns to re-boost the French property market ahead of other countries. Foreign investors can rest safe in the knowledge that France remains a stable place to invest.”

Other advantages for foreign investors buying French leaseback properties are the VAT rebate, guaranteed rental income (currently around 4% net of all charges and running costs with P&V) and the availability of attractive French mortgages of up to 100% LTV, with interest rates as low as 2.6%. Rental income should be free of French income tax (as you can offset expenses, amortisation and mortgage interest) and the property can be sold free of French CGT after 15 years, making it a compelling investment in one of the world’s most stable and solid property markets.

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