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REAL ESTATE

The ‘unwanted’ French properties with falling prices

The lockdowns and travel restrictions caused by the pandemic are changing what potential buyers are looking for in their future homes in France, as well as what they’re trying to avoid.

The 'unwanted' French properties with falling prices
More than a third of future buyers want to move away from big cities. Photo: Philippe Lopez/AFP

By revolutionising the way we live, the pandemic has shifted our views on what makes a home attractive, especially after spending the majority of the past year working from home.

“This has definitely changed what people want,” Joanna Leggett, Marketing Director at Leggett Immobilier, told The Local.

 

It has also changed what they don’t want. Covid-19 has impacted France’s property market in several ways, such as the move away from big cities like Paris and, a rejection of the pre-pandemic lifestyle known as “Métro-boulot-dodo” (Metro-work-sleep).

Of course, not everyone will want to (or will be able to) settle in a remote village in the middle of the countryside. Not everyone can work remotely, and the majority of jobs and services are still concentrated in big cities. 

But here are some factors to bear in mind if you’re thinking of selling or buying a property in France in 2021.

Too small

A study conducted during the first lockdown last spring found that only 23 percent of people spent lockdown in a property larger than 101 square metres. In Paris, 69 percent of people were confined inside an apartment.

Since then, the demand for small properties such as city apartments without balconies or access to green areas has dropped. According to a study by real estate website Seloger.com, over a third of future buyers now want to move away from big cities.

“Generally speaking, there has been a shift among the urban population towards greener areas,” according to report by the Notaires de France, published on February 15th.

Parisians moved to the suburbs while inhabitants of the greater Paris Île-de-France region “spread out towards Normandy, La Perche or Burgundy,” according to the report.

READ ALSO: Suburbs’ property prices soar as Parisians continue to flee the city

It added: “In the same vein as French residents, non-resident foreign buyers in the provinces are shifting their investment from urban centres to rural areas.”

As a result, property prices in Paris dropped by 0.1 percent in 2020, breaking with a trend of a 9.9 percent rise registered the past two years – 31.4 percent when looking back five years. 

Leggett said this trend would likely continue in 2021, saying: “Paris’ prices are expected to drop whereas they always increase.”

No outdoor space

For international or French buyers, a balcony, garden or proximity to nature have become key requests, in rural areas and cities alike. Properties without access to green areas or a balcony are therefore less in demand than before the pandemic hit.

“Outside space has become a major criteria,” Leggett said. “It’s the one thing everybody mentions in their initial email.”

On advertising site Leboncoin, searches for “house with a garden” and “house by the sea” increased by 40 percent compared to the same period the previous year.

Meanwhile in cities, balconies and terraces have become a basic requirement for those looking to buy a flat, and on average increase the price of a property by 8.8 percent

“Countryside properties are increasingly in demand,” Leggett said.

More functional 

Widespread remote working has meant that having enough space to work from home has become a basic requirement. Having a separate room for work is not a luxury the majority of people had, with many setting up their offices at their kitchen or dining tables.

When French people suddenly found themselves in lockdown a year ago, 34 percent of them said they lacked a proper work space, according to a study on the quality of housing by Ipsos, while 60 percent said they would have liked to have one.

That extra space has since become essential, especially considering that some companies are likely to become more flexible when employees go back to the office, and will be more open to letting them to work from home a couple of days a week.

Apartment buildings

In cities as well as towns, copropriétés (co-ownership), where buildings are owned jointly by individual flat-owners, are common in France.

But lockdown has made people eager to own a space that is separated from other people, without the hassle that comes with managing a co-owned building, and without the noise that comes from living in close proximity with neighbours. 

According to SeLoger, seven out of ten French people aspire to own a house one day, and the figures from Orpi show that 59 percent of buyers are looking for a house, and 9 percent rejected the idea of living in an apartment at all.

Holidays at home

The pandemic has also made the international property market less attractive than the domestic one for second home buyers.

“There is a big increase in French people looking for holiday homes at home,” Leggett said.

Biarritz, Charente-Maritimes, La Rochelle – the entire west coast is seeing its popularity surge, as people crave a second home to escape to without needing to do a Covid test.

The trends differ when looking at French and international buyers, Leggett said. French property hunters are ditching big cities for the suburbs, where they might be able to afford a house with a garden.

Internationals have changed their behaviour less following the pandemic, but Leggett said they rarely tended to look for property in French cities either way – except in Paris. With the capital’s popularity in decline, there will be possibilities for making relatively good real estate deals in 2021.

“If you can get a two-bedroom apartment for an underrated price now, it will still be a good investment in the future,” she said.

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PROPERTY

French property: What is buying ‘en tontine’?

If you're buying property in France, you might be thinking about buying 'en tontine' - this has advantages especially when it comes to France's strict inheritance laws, but can also have tax implications.

French property: What is buying 'en tontine'?

What is it?

The ‘clause de tontine’ sometimes also known as a ‘clause d’accroissement’ is a clause that is inserted into the property deeds when you are buying a house or apartment.

It can only be inserted during the purchase, and cannot be added later.

It’s basically a ‘group purchase’. It’s most commonly used by unmarried couples who are buying together but it can be used by larger groups too – for example a group of friends buying a holiday home together.

You will have to ask a notaire to draw up the tontine clause during the property purchase and it can only be used if 

  • the parties are equally involved in the financing of the purchase
  • the parties involved have a roughly equal life expectancy (for this reason tontine clauses may be rejected if there is a significant difference in age between the purchasers)

What’s the point of it?

The main reason that people use it is to sidestep France’s strict inheritance laws, which assign that a certain portion of every estate must go to children, at the expense of a partner. 

READ ALSO How France’s strict inheritance laws work

For this reason it is particularly used by couples who have children from previous relationships.

On a property with a tontine clause in effect, when one owner dies their share of the property passes in its entirely to the other member/members of the tontine.

This cuts out children from inheritance, but means that a surviving partner is not evicted from their home in favour of the children of the deceased. 

It also has the advantage of making the intentions of the deceased clear, to avoid arguments among heirs after their death.

It should be noted, however, that the tontine clause only takes in the property that it covers – other assets may be subject to French inheritance law so it’s therefore probably wise to arrange a will, to ensure your wishes for your estate are met.

The surviving party can ask a notaire to update the property deeds to show that they are the sole owner, if they want. Be aware there will be a fee, which could reach four figures for the privilege – and it doesn’t actually involve any change to the property title.

Drawbacks

The advantages of the system are clear, especially for blended families, but there are some potential drawbacks too, which mean that anyone considering buying in this way would be well advised to take proper legal advice before they start.

Inheritance tax – while a tontine will help you to avoid restrictions on inheritance, it does not exempt you from inheritance tax. French inheritance tax is structured according to your relationship to the deceased, and people who are neither married nor related to the deceased pay an eye-watering inheritance tax rate of 60 percent.

The only exception to this top rate of inheritance tax is if the property is your main residence and it is valued at under €76,000 – in that case, tax is paid at a rate of 5.8 percent.

Married couples and family members pay a much lower rate or not tax, but if you’re not married to your tontine co-purchaser, be careful that you’re not lining yourself up for a massive tax bill in future years.

Wealth tax – depending on the value of the property, it could tip you over into the ‘wealth tax’ category when you inherit. France’s wealth tax is a real estate based tax and is levied on anyone who has real estate assets (property and land) worth €1.3 million or more.

The calculation includes property held en tontine.

Tax savings – you might hear tontines being advised as a way to limit your French tax liability.

While this used to be true, changes to tax laws means there are no no significant tax advantages to buying this way – the same is true for buying a property via an SCI, which used to represent a tax saving until the law was tightened up.

Disinheriting family membersOne side effect of the tontine clause on mixed families is to effectively disinherit any children of the first person to die.

Because the property passed to the survivor, under French law, only their direct descendants – rather than any family by marriage – are entitled to automatic inheritance.

That means that the children of the surviving partner will be entitled to the statutory share of the entire asset (between 25 and 30 percent depending on the number of children), but the children of the first person to die will be entitled to nothing. Obviously you can choose to leave them something in your will, but you can only leave them some or all of the estate which is not automatically given to the children on the survivor.

Divorce/dispute – if the members of the tontine split up or (in the case of friends) fall out, then they can either sell the whole property or agree to buy each other out.

However, if one party refuses to sell, then you have very limited legal options – unlike a standard property purchase a tontine is not regarded as joint ownership, so one partner cannot be forced to sell as part of a divorce procedings, for example.

Basically the tontine can only be ended or changed with the agreement of all parties – so if you can’t agree between yourselves then you may be stuck with it.

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