France has an abundant supply of value homes from beautiful farmhouses to rustic village houses or coastal apartments to mountain chalets. Homes even have relatively lower prices than in those found in the UK, making french properties a worthwhile investment.
Is Now a Good Time to Buy a French Property?
Compared with its neighbouring countries like Spain and the Netherlands, the French property market performed relatively well during the recent economic crises. France remains one of Europe’s highly performing housing market that continues to attract a huge number of foreign investors thanks to its stable year-on-year price growth.
In the last quarter of 2017, French property prices increased by 3.3% y-o-y, with older apartments taking the lead at 4.5%. Paris posted the biggest increases where second-owned properties appreciated by 5.1% in Q4 of 2017 and 8.6% y-o-y.
In 2018, the prices remained strong despite transaction levels falling slightly as 42% of banks reporting reduced loan applications. Most of France’s property market upturn can be attributed to the low mortgage rate and consistently low inflation rates. Weaker euro is also fuelling more foreign buyers to make property investments in the country.
French Property Taxes: What You Need To Know
There are two main property taxes buyers must pay for new build purchases, which totals to a little over 20% of the total property value. When it comes to buying second-hand properties more than five years old, buyers must pay three separate taxes with a maximum tax payable amounting to only less than 9%.
The Notaire is the one responsible for calculating all tax dues for a property. They will be the one to draw up the house purchase contract. Notary fees are calculated in bands in different percentages from 5% for the first €3,000 and decrease in increments to 0.3% if over €120,000. Note that notarial fees vary.
Taxe fonciere is an ongoing property ownership tax that a buyer must pay annually. It is calculated based on the 50% of the valeur locative cadastrale or land tax assessment value. This can be obtained by multiplying the cadastral profit by the rate set for the commune. In general terms, this tax is based on the property floor area multiplied by the location valuation rate.
Like Taxe fonciere, tax d’habitation is also paid annually. It is not a property tax but a community tax that covers for local services such as road maintenance, garbage collection, street lighting, and payment for the local Mairie staff.
Note that the tax d’habitation depends on who occupies the property and is levied on January 1. If the owner is renting it out, then the tenants will shoulder the fees if they occupy it on January 1. However, if they move in on January 2 until December 31, the landlord will shoulder the fees.
Rental Income Tax
Rental income in France has a flat rate of 25% for non-residents whilst nationals follow a sliding scale with a maximum taxable rate of 25%.
Capital Gains Tax
The French Capital Gains Tax is pretty complex as its computation depends on the residency status and the length of ownership of the property. In general, the sale of a property owned for more than five years will be exempted from CGT if the buyer has lived in France for at least one year. If not, the difference between the purchase price and the sale will be calculated with 10% allowance for acquisition cost and 15% for repairs and needed improvements (this can be more if there is documentation).