MLS-2 Blog

Why France III - Maximum Capital Growth

November 3, 2007 on 1:06 pm | In Investment, International, French Real Estate |

Maximum Capital Growth! Since 2001 and the introduction of “Loi Robien”, capital growth in the main metropolitan city areas has grown at average of 22% per annum! 2007 has seen a slow down in the market by the French, in anticipation of the May and June Presidential and senate/house elections. This was especially so as the outcome depended on the tax concessions to be given by Nicolas Sarkozy. (Prices have only risen slightly while the French waited. Overseas investment has broken records so far!) Well Nicolas Sarkozy won!! New laws are in and conditions remain favorable for investors!!

Property for buying and renting is in extremely short supply in France and new build start up is very far behind demand. Official figures at the end of 2006 project the housing shortage as over 1,000,000 (1 million!) units. As an example - new build start up in Toulouse for 2007 will be approx. 2,600 units for the year, but 1000 people PER MONTH are moving into the area! French law mandates that only 25% of any building can be sold to investors! The remaining apartments are for owner/occupants only! Rents rose by over 8% due to the tremendous shortage in rental property!
(Source : Chambers of Notaires and Commerce / FNAIM)

Published market values/figures have consistently shown that while development is under construction the capital value of the property increases by approximately 6% per annum over normal capital growth!! This is influenced by the fact that the tax/notaire/legal fees, (“closing costs”), on new build is fixed by law at 2.5%, while on old build it averages 15%.  Obviously, maximum profit potential comes from investing in a new-build as early in the construction process as possible when prices are typically a fraction of what they will be when the project is complete and becomes publicly available.