Buying a house in France as a property investment
Purchasing a newly constructed home in France offers many advantages to investors: low mortgage rates, no agency fees, low legal fees, exemption from property taxes for the first two years and a government mandated 10 year warranty from the developer. Combined with France’s many cultural and quality of living amenities, buying a newly constructed residential property in the country has many intangible and financial benefits.
A recently published report by Standard & Poor into the European housing market for 2020-2021, predicted that house prices in France will increase by 3.5% during 2021 following a 5.8% increase during 2020. As the report states: "We expect house prices in France to increase by 5.8% this year, and 3.5% in 2021, as households continue to benefit from low interest rates and a resilient economy bouncing back from the Covid-19 pandemic."
In the 12 months to April 2020, there were over 1 million houses sold in France, more than at any time since 2006. Certain French cities showed strong growth in property prices during 2020, such as Angers in Western France (+9.1%), Nancy in Eastern France (+10.4%) and Montauban in South-West France (+12.1%). But other areas saw stagnant or decling house prices, such as Saint Etienne (0.0%) and Toulon (-0.4%)
So property prices are not growing at the same rate throughout France. As a general trend, house prices in Western France have shown the strongest upsurge over the last 12 months, especially in the fast growing cities of Rennes and Nantes. But the West of France is still playing catch up with Paris and the Southern part of the country in terms of the overall value of property. Prices in Bordeaux have grown by +48% over the last 10 years. Toulouse has see an increase in house prices of +14% since 2008 and in Montpellier, property prices have grown by +4% over the same period.
By contrast, house prices in the area surrounding Brest in Normandy have fallen by -12% over the last 10 years and there has been a -5.0% decline in property prices in Rouen.
Therefore, whilst the recent increase in property prices in the South of France may appear modest, if you look at the overall long term trends, the property market here has been far more resilient to peaks and troughs in average house prices. The last decade has seen strong year-on-year growth.
Part of the reason for this lies in demographic trends. As the population of Northern Europe continues to age, a sizeable minority are predicted to choose the South of France as either a permanent or secondary retirement home.
Secondly, the continued infrastructure development of the country (such as the opening of the TGV high speed line direct to Barcelona) and the break up of Paris' monopoly on international flights, will lead to a further opening up of the South of France.
Thirdly, business investment in renewable technologies (wind and solar) and the continued growth of business hubs (Toulouse: aerospace; Montpellier: bio-tech and IT; Marseille: research & development) will continue to draw more people into the South of the country to work. As an example, Montpellier remains the fastest growing city in France and in 2020, it overtook Strasbourg as France's 7th biggest city.