When most people talk about France, the first thing that comes to mind is Paris – the City of Love. Often, this overshadows the fact that France is strategically located along the borders of Germany, Switzerland, the UK, Spain, Luxembourg, and Belgium. This location allows France to benefit from its neighbours. With this, it is safe to say that making property investments in France is profitable since it had a strong start to its third quarter and a stable growth rate in the second quarter. The improvement in capital goods output marked a rebound in industrial production, which, integrated with an expansionary Purchasing Managers Index (PMI), predicts well for private sector activity.
The Economy of France
France is well-known as the most visited in the world with its famous tourist destinations, making it a distinguished sector in the economy. Germany is France’s closest trading partner in the external sector and contributes to more than 19% of total imports and 17% of total exports from France. The country’s principal exports are transportation apparatus and machinery, plastics, aerospace equipment and plastics. Their primary imports involve crude oil, machinery, and automobiles.
With over 70% of France’s gross domestic product, services are the major contributor to the country’s economy. In Europe, France has the highest number of science graduates per thousand workers. The country is one of the global leaders in cosmetics and luxury goods, aerospace and railway sectors, and in the automotive industry. France’s economy represents around one-fifth of the Euro area gross domestic product, and it is the fifth-largest in the world.
Most of the countries in the world faced an economic crisis, but the French economy managed to outpace economic reclines. France’s GDP only decreased in 2009 with low dependency on external trade and secured private consumption rates. Recovery from the crisis has been slow and generated a high unemployment rate, especially among the youth. These numbers have raised significant concern for policymakers. The economy stagnated, and France has had to face many economic obstacles. Consumer purchasing power has declined, and government tax revenue has decreased. The government takes on the obstacles of organizing France’s public finances while uplifting economic growth.
A multi-year low unemployment rate at the start of the quarter lifted consumer optimism. In defiance of the announced household tax cuts, the government should lower the slippage to 2.1%-2.2% of GDP, from 3.1% of GDP shortfall. The 2019 Economic Freedom Index ranked France as the 71st freest in the world with an overall score of 63.8.
Progress is expected to slow down this year as headwinds are expected across the Eurozone. An economic situation where optimistic domestic activity should shield the slowdown of the growth of the economy, whatever it takes. Prolonged Brexit-related apprehensiveness and trade disagreements deliberate about on the external sector. Experts say that the economy is challenged to strengthen the predominantly steady pace of expansion, offsetting cooling exports as Macron’s tax cuts shore up household spending.
Liveability in France
The Economist’s Liveability Index made France thirteen places higher this year, with Paris clinching the 19th spot two years after its ratings dropped down due to terror attacks. Vienna is now at first place according to Global Liveability Index, dethroning Melbourne down to 2nd place after seven straight years in the number one spot. Paris is the 19th city in the world with the finest culture, education, environment, infrastructure, healthcare, public safety, and stability.
Paris has the most substantial increases due to its imposing improvement in the safety classification. La Ville L’amour, the highest-ranked French city, fall behind other prospered world cities like Calgary (Canada), Sydney (Australia), and Osaka (Japan). The city of Lyon is the second-ranked French city and at 30th place among the top 50. Other western world cities such as New York and London, ranked 57th and 48th respectively in the liveability index, much lower than the two French cities. Unfortunately, however, highly developed a city is, all suffer from high levels of congestion, public transportation problems, and crime.
Property Investments in France
In France, transaction costs are moderate to high. An average of 7.90% to 28.99% for round-trip negotiation cost in France. Negligibly offset by a smaller registration fee, the highest costs caused by the 20% VAT are the new properties. Then there’s a distinguishing split between seller and buyer that range from 3% to 10% for real estate agent fees.
Most property is freehold, and there are no limitations on foreign property investments in France. There are two forms of freehold for apartments: volumes, modified mostly for mixed-use developments, and co-ownership (votes were taken and accounts kept). There are also an up to 99 years leasehold.
Property Market Trends in France
House prices went up by 3% from last year to Q1 of this year (1.8% inflation-adjusted), almost equal to the previous year’s growth, as given by the National Institute for Statistical and Economic Studies (INSEE). The average price for existing apartments in the city went up by 6.5% (5.2% inflation-adjusted) to €9,680 (US$11,000) per square metre in 2018 to Q1 of 2019, as per La Chambre des Notaires de Paris. For thirteen straight quarters of year-on-year hikes, quarter-on-quarter, house prices escalated 0.7% in Q1 2019 (0.9% inflation-adjusted).
Rentals returns in France are moderate, but if you own an apartment in Paris, you will not have a problem with it. The demand is so high that rental rates don’t go up that often and contracts are usually long-term, and there are legal restrictions on raising rents while the contract is still active.
There’s a moderate gross rental yield from apartments in Paris, at around 3.9% for big apartments and 4.2% for small apartments. It is about EUR 970 per sq.m. for a 120 sq.m. apartment. There’s no significant difference between bigger apartments and the smaller ones. Monthly rent averages EUR 32 to EUR 35 per sq.m. for smaller apartments.
CHG Recommendation: Paris Apartments are Still Profitable Investments
Year-round, Paris sees troves of tourists. So, if you want to make property investments in France, go for apartments in Paris. The city has tons of earning opportunities. In 2018, the city hit record numbers of tourists, with close to 40 million people headed to Paris and the Ile de France region, and experts believe the number will likely increase as tensions die down.