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Finding Your Dream Home: Buying Property in France
At a Glance:
- Although renting a home is slightly more popular, more people in France are buying, making use of low interest rates.
- When you use a real estate agent, make sure they are certified by a registered body.
- A mortgage broker can help you with your French mortgage application.
- Your notaire will help you finalize the purchase, but as an impartial entity, it is not their job to inform you of any issues with the property or negotiate a good deal for you.
The French Housing Market
After a housing boom with rising prices between 1997 and 2007, the French real estate market experienced a slight drop in the past years. Due to low interest rates and relatively low housing prices, the market started to gain momentum again in 2016, with demand rising at an impressive level. According to the European Central Bank, over 840,000 housing transactions were recorded that year. In Paris and Île-de-France, the number of apartments sold rose by 23% and 32% respectively in the first quarter of 2017, compared to the year before.
Since the economic conditions in France are improving and the interest rates are predicted to remain low, the demand for property is expected to rise even further as are housing prices. Real estate outlooks predict a 3–5% increase.
That being said, not every region across the country is affected by the strengthening of the housing market. The economically depressed parts of France in the north and east of the country have seen falling prices, and areas which are underpopulated remain so.
How to Find Your Dream Home
Where you ultimately decide to settle in France obviously depends on you and your personal preferences. Maybe you have already moved to Paris and are now looking for your very own apartment with a view of the Eiffel Tower or you are hoping to buy a cottage in the Provence to complete your move abroad.
There are many ways in which you can find the property of your dreams. Online listings and private ads are a popular way, but most expats prefer to use real estate agents instead. Those have a good idea of the market and the average housing prices and will be able to explain details which might otherwise get lost in translation.
When looking for an agent, make sure that they are certified by a registered body such as FNAIM (Fédération de l’Immobilier), SNPI (Premier Syndicat Français de l’Immobilier), or UNPI (Union Nationale de la Propriété Immobilière).
Getting a French Mortgage
It is rather common to finance a purchase of this size with a suitable mortgage. In fact, 80% of all owned houses and apartments in France are purchased with a mortgage, according to the Global Property Guide.
Borrowing money in France can have some big advantages: It allows you to lower exchange rate risks and gives you more freedom when purchasing on the French market. You can secure your mortgage with the property you are buying in France, while a non-French mortgage will require you to produce other securities. Moreover, interest rates in France have been low in recent years which is another upside. That being said, non-European buyers might be subject to some restrictions.
First of all, not all French banks are willing to offer mortgages to non-European buyers. Those that do may offer only a limited product range and lower maximum loans. There might also be some limitations when it comes to the product itself, and often only repayment mortgages are available to non-European expats, as opposed to interest-only options which require a lower monthly payment.
Applying for a Mortgage
Unless your French is flawless and you know exactly how to navigate the French banking system, hiring a mortgage broker of your choice might be a good idea. They can help you through the application process and ensure that your application will not be denied just because it is incomplete. Moreover, most brokers have good working relationships with the major banks and can therefore help you negotiate a good deal.
The process itself should be the same, no matter where you come from. The application form provided by the bank can be up to twelve pages long, so it is important that you set aside some time to go through it. Since most French banks rely on a thorough financial audit to determine whether or not an applicant is eligible for a mortgage, you need to provide proof of your financial situation. It is important that you declare every account and credit card transaction of at least the past three months. Your prospective lender will check if you have omitted any accounts and also look at all bigger and smaller transactions from your accounts.
Your pay slips and employment contract may be required as well, as will proof of additional income from commissions or bonus payments, if applicable. If you are self-employed, the lender will rely a lot on your tax return and base their calculations on your tax paid income.
Your broker will put together your application, so that you just need to provide the appropriate paperwork. In most cases, a simple copy will suffice, although some banks might ask you to produce the originals.
Types of Sales Contracts
Generally, there are two types of sales contracts for French property, the Promesse de Vente and the Compromis de Vente. Generally speaking, a promesse has to be taken care of by a notaire and is actually a unilateral offer to sell. When you sign this contract, you need to pay a deposit of 10% of the purchase price. After that, you have ten days to withdraw from the contract without losing your deposit. This may be the case even if the seller agrees to hold the property for you for a longer period of time.
Property professionals often use this type of contract to get an option to buy a specific piece of land or property.
The compromis de vente is more commonly used as a purchase and sales contract and can be concluded between the buyer and the seller directly (although that may not always be advisable). This type of contract includes a clear bilateral obligation: the buyer agrees to buy from the owner and the owner agrees to sell to the buyer. You are also required to pay a 10% deposit but unlike the promesse de vente, the compromise de vente only gives you a cooling-off period of seven days to withdraw.
If you use a mortgage to finance your purchase, ask for a conditional clause (condition suspensive) to be included in the contract that allows you to withdraw if your mortgage application gets denied. There are other conditional clauses that might make sense for you and which might not be included in a standard contract. Make sure to discuss this with your real estate agent and your notaire beforehand.
Signing the Contract: The Final Step
When you have paid all fees and made outstanding payments, your notaire will set a date to sign the deed of sale, the acte de vente. It is important to arrange a final viewing before you sign: most contracts include a clause saying “sold as seen on signing date”, so any repairs or adjustments you expect the seller to make should be completed beforehand.
You will have to be present for the signing, of course. It might also make sense to bring along a translator to help you sort out any final issues and questions concerning the contract. After you have signed the deed of sale, your name will be registered at the land registry and you can pop open that bottle of champagne to celebrate your home ownership.
Some Things to Keep in Mind
As with every major step you take in your expat life, there is a lot about buying a home in France that you should keep in mind to ensure a smooth process.
Working with a Notaire
While a notaire can help you with the odds and ends of purchasing your dream home, it is not their job to hold your hand throughout the entire process. This means that you need to be aware of certain aspects, such as the conditional clauses mentioned above, and ask specific questions.
It is common for buyer and seller to use the same notaire. This is not necessarily an issue, since notaires are required to be impartial. However, this also means that they will not try to get you an advantage or negotiate a better deal for you. It is also not their job to inform you of any damages or other issues with the property. Unless you are a real estate expert and fluent in French, it might make sense to hire a property lawyer to help you get the best out of your purchase.
French Inheritance Laws
While there are no restrictions on non-EU nationals hoping to buy property in France, and while the process is largely the same for all, you might still have to take some precautions. French inheritance tax is not a thing to take lightly, no matter if you are a EU citizen or not. According to the EU Succession Regulation of 2015, the inheritance laws of France or of your country of origin may apply. You need to state your choice in an official will.
This regulation was meant to simplify international estate administration, but in reality, it can make things rather complicated. Even if your house in France is not your main home, your loved ones might be required to pay French inheritance tax when you pass away.
Wealth tax is another point you should keep in mind, especially if the net value of your French property exceeds the minimum threshold (1.3 million euros in 2017). Therefore, it makes sense to address tax questions with your accountant or financial adviser before you sign the deed.
You may be happy to have found a dream home which is within your budget, until your notaire informs you of additional fees. These are not low and you need to account for them in your calculations before you finalize that purchase. The fees are as follows:
- Notaire fees: 1–1.5%
- Legal fees: 1%
- Transfer fees: 6–7.5%
- Property registration fees: 1%
- Stamp duty: 5.09–5.8%
This does not cover additional costs for your mortgage, real estate fees, etc. It is not surprising that costs can add-up quickly and make your dream home unaffordable for you. It’s best to make a rough estimate before you start making an offer of signing a purchase contract, to give you an idea what you can really afford (including the fees mentioned above).
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