With the horror stories of land grabbing in certain countries, investors are rightly wary of investing in property abroad, especially buy-to-let property. Although many of these stories may be exaggerated, the truth is that overseas property investment can be a risky business and many have fallen victim to illegal development with insufficient or incorrect documentation or simply no planning permission.
Purchasing a property solely for buy-to-let investment purposes invariably means that the investor rarely visits or inspects the property or the surrounding land and is at the mercy of the property developer or property management company.
So could a land grab happen in France? Are French property investments safer than anywhere else? Several reasons indicate that France seems to represent one of the safest places in the world for buy-to-let real estate investments.
1. The French are fascinated, some may say obsessed, with paperwork, contracts, bureaucracy and the rule of law which in many cases only frustrates those used to more laissez-faire Anglo-American business models . However, in real estate transactions, this fascination with paperwork provides an extremely rigorous buying process and a protective legal system. Nothing is allowed to happen in the property transaction without the Notary verifying the necessary controls for compliance with the rules.
2. Returns and capital growth may not be a spectacular 20% as advertised by developers in other countries, but the returns, yields and annual growth of your real estate investment in French properties should generally net you between 5 and a consistent 10% on rental and resale returns. The French real estate market is mature and provides reasonable capital growth over several years rather than “make a quick buck”. It is possible to make huge profits when investing in property in other developing markets, but the risks are much higher. In general, the French real estate market is aimed at the most savvy investors in the medium and long term.
3. French mortgage terms and conditions are extremely favourable, with some of the lowest interest rates and in some cases the possibility of 100% mortgages. But again, this is backed by a comprehensive application process to ensure conditions are met to the letter.
4. The French buy-to-let investment property market is backed by the government. Although not without its criticisms, the example of the leaseback system is one that can provide a guaranteed return of 5.5% (well above any mortgage interest) and a full VAT refund of 19.6%.
5. Unlike many other destinations, France does not depend on foreign investment in its property market. More than 90% of property sales are made to the French themselves, who are constantly buying holiday accommodation. What this means to the foreign investor who is ready to sell and cash in on his investment is that there is a proven resale market.
6. France has always been at the top of the world tourist destinations. This means that the demand invariably exceeds the supply of quality tourist accommodation. For the investor looking for reliable rental returns, France offers an almost sure bet.
7. Whether you want to check the location of your investment or want to spend some time in it, France offers you an unbeatable environment: the climate, the wine, the food and the culture mean that you can always enjoy visiting your property.
8. French property developments are unlikely to come to a halt for any reason other than a misjudgment about the feasibility of the project. It is unheard of for property to be torn down as part of a land grab.
All in all, this translates to France being one of the safest, if not the safest, places in the world to invest in buy-to-let property. Of course, the same principles related to good legal and financial advice apply wherever you want to buy, but France does a lot to preempt that advice with a set of conditions that are safe and ripe for the savvy investor.