Investment in French apartments: features purchase and taxation

The primary property in France is profitable to buy for investment, since the prices of such properties in most major cities are growing despite the crisis, and in the delivery of new housing to lease, you can receive significant tax benefits.

Best markets: Nantes, Toulouse and Bordeaux

The site Explorimmoneuf.com made a rating of the best French cities for investment in housing. Consideration was given to such factors as the demographic situation, the labor market, the number of students, the dynamics of prices and the proportion of investors who invest in new buildings.

Best city for investment in France in 2014 voted Nantes. Among the advantages of this city — a large number of new construction projects, the influx of population, convenient location close to the Atlantic coast. In addition, in 2013, Nantes was chosen as one of the “greenest” capitals in Europe, being in the same list with Stockholm and Hamburg.

The second after Nantes in Toulouse. Buildings are sold in an average of 3 720 Euro/m2. By 2020, close to Matabiau station will be built a new modern quarter. Another plus by that time will be put TGV (high speed train), through which from Toulouse to Paris can be reached in just over 3 hours 15 min.

In the third place Bordeaux. Here building a new ackwardly, and elevated Central part of the city and establish transport links. It is expected that by 2030 the population of the Metropolitan area is 1 million people. To meet the needs of a growing population, by that time, the city will be the construction of 50 thousand housing units. The average price for Prime properties in Bordeaux and around EUR 4,000/m2.

Paris was only on the seventh line rating. This city has one big disadvantage — there is rarely build a new home. Prices for Prime properties in the French capital, the highest in the country, they exceed 10 600 EUR/m2.

Rating	City	Average price Euro/m2	Dynamics, % for the year
1	Nantes	3 860	2,4
2	Toulouse	3 720	1,8
3	Bordeaux	4 000	20,0
4	Lyon	4 420	To -2.9
5	Villeurbanne	3 720	1,8
6	Montpellier	3 800	4,0
7	Paris	10 662	-0,8
8	Straburg	3 310	-7,1
9	Clermont-Ferrand	3 300	5,8
10	It	3 250	-5,6

Elena Generalova, Director of the French Riviera Realty, believes that the new housing is also profitable to buy around the Cote d’azur: “At the moment, in nice interesting projects are the Maison Blanche and Villa Victoria, Cannes — Cannes Maria, in cap d’antibes, Paradise Cap, in Villefranche-sur-Mer — Eden”.

According to her, the demand for new housing of the côte d’azur is not reduced: “It is because in this region there is no free land for new projects. Is infill development on the site of the old demolished buildings. As on the Cote d’azur a lot of monuments, old buildings are rarely demolished. In this regard, the demand for new buildings is very high: 60-80 % of the apartments sold within six months of the start of sales.”

The cost of purchasing: 25% of project cost

In France, the purchase of real estate at the construction stage or housing is not older than 5 years, the price includes VAT at 20% of project cost.

“VAT is not calculated separately from the market price. Sometimes VAT is charged separately and paid at purchase, and the next year after acquiring a customer, whether Frenchman or foreigner — gets the tax refund. But in this case it is only buying items for the commercial lease (bail commercial). The rate of the notary when buying a primary residence in two times less than the purchase of “secondary housing” — 2-2,5 %. The buyer does not pay for the services of a realtor — he gets paid by the Builder,” says Lara Paranan, Director of the Department of Eastern Europe AS et Associés.

The buyer pays duty on registration of the transfer of property rights (droits de mutation), which is calculated at the rate of 0.6 % of the property value excluding VAT. To it are added the cost of collection of taxes (frais d’assiette) is 2.5 %. In addition, the buyer pays different purchase costs: stamp duty, registration of mortgage (if necessary) and registration of property rights. A notary fee — a minimum of 1% of project cost. These additional administrative expenses of approximately 3 %.

“These costs mainly consist of taxes and duties (80 %), other expenses and administrative costs (10 %), and lastly, remuneration of the notary (10 %). Notary expenses for the purchase of secondary housing (excluding mortgages) amount to 7.5 % of sales price, and the purchase of apartments in new buildings — 2 %. This is a significant savings in the framework of the investment”,— says Elena Generalova.

The purchase price	180 000 (including VAT 20 %)
The fee for the issue transfer of ownership	900 (0,6 %)
Notary fees	3 000 (2 %)
Administrative costs	4 500 (3 %)
Just	188 400

Program: Duflot, Sancy-Bouvard

In France many programs for the purchase of primary residence, among which the most famous are governed by the laws Duflot and Sancy-of Bouvard. They include the purchase of new items for subsequent lease at least nine years.

Program	Participants	Conditions of purchase	Tax benefits
The Law Duflot (loi Duflot)	Individuals, tax residents of France, the holders of shares in Civil companies for real estate transactions (Société civile immobilière SCI)	Maximum purchase price — 5 500 € /m2, maximum investment amount — EUR 300 000	Tax deduction up to 18 % of project cost
Amateur for rent furnished housing, classic option (LMNP Classique)	Individuals residents of France or her overseas territories	Complexes for students tourists the elderly or disabled	VAT refund and reduction depreciation up to 90% to optimize income tax rental
Act Sancy Of Bouvard about Amateur rent furnished housing (LMNP Censi-Bouvard)			Deduction of 11 % of the cost of the object excluding other taxes maximum tax refund — 3 666 Euro per year

There are other tax benefits. “When buying a new property going on the tax exemption on the property within two years after construction. If the level of energy savings of buildings higher than prescribed legislative requirements, buyers can be fully or partially exempt from property tax for another three years”,— says Elena Generalova.

According to Lara Paranan if the Russian client has no income in France, he did not put tax credits. “But with the purchase of a high quality in terms of energy property (label BBC — bâtiment basse consommation) the facility is not subject to property tax (taxe foncière) for five years,” she says.

Resale: wait 7-10 years

Profit from the new buildings can be obtained not only when the lease, but the resale.

“If you buy apartment in a new building at the beginning of the construction program, often due to the price adjustment can save 15-20% in the next 12-18 months,” says Elena Generalova.

If in Dubai, the investors resell the property immediately after the purchase, before the registration of ownership, in France, according to Lara Paranan, primary property should only be purchased for long-term investment.

“When buying real estate you cannot count on a short cycle — it is a utopia. The only exceptions are some cases, for example when creating a large project in a completely new area and many apartments are sold: at the time of delivery of real estate can rise in price due to the fact that there is a new quarter and there’s a pleasure to live with. The highest jump of around 25 %. However, few people immediately sell as it will be high income tax, if the seller lived there for at least five years. The normal cycle is 7-10 years,” says Lara Paranan.

Yulia Kozhevnikova, Tranio.Ru

Comments are closed.