LEB. For the last couple of months, it has been all the developers can think of. Behind this expression lies a new law, which will come into force in January 2013.

In practical terms, all housing will have to use less than 50 kWh (kilowatt hour) per square meter and per year. It is three times less than the current law. But it is just a national average. “The LEB law will be adjusted according to the regions. In Marseille, where the weather is nice, it will be 40 kWh; in Paris, a cloudier area, it will be possible to reach 65 kWh”, adds Benoit Arviset, development manager in Quatrinvest, a rental property investment specialist.

Bouygues, Nexity, Kaufman & Broad but also Les Nouveaux Constructeurs, Bouwfonds Marignan… Almost every big French developer has decided to anticipate the call. From the 1st of January for some or from the 1st July for others, all their developments have the BBC (French for LEB) label.

Tax benefits
The reason for such an enthusiasm is the great benefits developers can get out of it: in 2011, only BBC-labelled buildings will allow their buyer-investors to benefit from the Scellier system at its fullest, with a tax reduction of up to 25% for French investors. Without this label, tax benefits are limited to 15%. “It is quite a big deal for developers, because investors account for almost 66% of sales in France”, Paris-X University teacher Michel Mouillart adds.

Thus, the developers’ imagination is limitless when it comes to respecting the law. “Putting in condensing boilers is a good way to save energy” adds Bruno Corinti, chairman of Nexity Logement. “The building’s insulation is also very important” continues Marc Pigeon, chairman of the FPC, the French federation of developers.

Whatever the techniques used, professionals all agree on something: the shift to Low Energy Buildings increases the costs of construction by 8 to 12%, which represents an increase of 4 to 6% on capital assets costs.

In view of this situation, 2 choices can be made. Bouygues and Les Nouveaux Constructeurs both claim that their prices will not go up. The others intend to increase their prices to face this sharp rise in costs. “Because of the BBC law, our prices will increase by 3 to 5% next year” states Guy Nafilyan, CEO of Kaufman & Broad.

To find out more you can speak to one of our French new build consultants on 020 7428 4910

Source: Le Figaro

Buying under the French leaseback scheme is like obtaining a discounted purchase price, with the VAT element ( 19.6% of the price ) which is advanced by the State. On completion of the purchase ( e.g. signing of the acte de vente) you are required to enter into a formal lease with the management company  who will then rent the property out on short-term holiday lets. The leaseback contract covers a nine year period. Where the intention is to occupy a property for only a limited time each year, or even not at all, leaseback ownership can offer a regular rental income, without the burden of having to market the property personally, or employ local agents to do this. While such schemes normally offer a regular rental stream, it is commonly the case that the amount of the rent is lower than may be obtained for a similar property if sold directly, although this is probably the counterbalance for not having the burden of marketing the property, cleaning it, managing guests and so on.

So, here are the reasons why they are attractive investments:

- In hard times as we have recently seen and that some are still facing, there are great opportunities arising from the property market. For those who purchased a few years ago and need to sell quickly for whatever reason, some are happy to sell below the current market price for new build or close to the price they originally paid, so it is extremely favourable to buyers.

- From an attractive purchase price, you can benefit from a more competitive rental return. If you compare with what a new leaseback can offer, you could be better off with a resale in terms of profit margins.

- You will still benefit from the VAT advantage as you will ‘inherit’ the VAT benefit from the existing owner with no procedure involved as long as you accept that you will continue with the existing lease in place

- You get the same LMNP or leaseback tax incentive as if purchasing new, meaning that you can deduct your Notaire fees, mortgage interest, etc…from the rental income received to avoid paying taxes on rental income. And finally you can view the apartment you are purchasing, there is no off-plan mystery…which appeals to many investors who want to avoid any unpleasant surprises.

Virginie Hopps-Delplace | Specialist French Property Lawyer
for and on behalf of Charles Russell LLP

5 Fleet Place, London EC4M 7RD
(T) +44 (0)20 7203 5313
(F) +44 (0)20 3023 8024

A few months ago, Sextant French Properties created its own property index, the “French Rural Property Index”. Its primary function is to aid potential investors from the UK in understanding in much greater depth, the French rural property market. It demonstrates to potential consumers the trends and predictions for each specific region of France.

The Rural Property Index takes into account the 10,000 properties advertised on the Sextant website; most of them, around 97%, are old properties or “re-sale”, that is to say properties which have been on the market before and is either habitable, ready to move in or full renovation. The remaining 3% involve new-build and investment properties.

The index has now been updated and shows an evolution over 7 months, from October 2009 to May 2010. The French Property Index enables a graphical view of the average price trends in France which clearly shows that the housing market is slowly recovering. Since prices have been increasing steadily every month, we can predict that it will be the major trend for the coming months:  now would then be the right time to buy.

The Index also provides regional trends, showing average prices and evolution rates for the 12 most popular French regions, excluding the Paris and Alps regions. The reason is that these two areas experience irregular prices due to the very high demand and their peculiar situation (Paris being the capital and the Alps offering luxury ski resorts) that would skew the figures for France. For example, the average property price in Languedoc increased by 3% compared with October 2009 to reach €338,715 in May 2010.

Although the vast majority of properties in Provence Cote d’Azur is not rural, many British investors find the area a very attractive place to either have a holiday home or a more permanent domicile. As a consequence, Sextant, in accordance with its aim to help find the perfect French home for British people, decided to include these properties in the Index. The prices in this region average €754,870 and experienced a 20.4% increase compared with October 2009.

Click here to view the latest figures: http://blog.sextantproperties.com/french-rural-property-index

Matthieu Cany
Managing Director of Sextant French Property
Tel: 020 7428 4910
www.sextantproperties.com

During last 14 months, yields of home loans have known an important decline. They went from the average of 5.15% during November 2008 to 3.45% in April 2010 (source: Observatoire credit lodgement/CSA).

The decline known between January and December 2009 has the same impact as a price decrease of 10%. So this fall makes new buyers more than happy but it is not the case for those who made a mortgage at higher rates.

Calculate the cost of this operation

The operation can be possible by repurchasing your current mortgage by another bank but most of the time, it is costly. First, you need to pay early repayment charges (ERC). It is approximately 1.5% to 3% of the remaining amount and capped to six months of interests. Some years ago, borrowers were able to negotiate with their bankers regarding these ERC (but it has been clearly more difficult during the last two years). To these, you need to add the guaranty fees. If you have a first mortgage, it will be 0.7% of withdrawal fees, and 2% for the settling of a new guaranty. Finally, there are the contract fees that can be up to €1,000. The total cost can be up to 5% of the amount to borrow. However, this could be a profitable operation but it should fill two of the three followings required conditions: the remaining capital borrowed should exceed €50,000, the length of remaining duration should be more than 10 years and the borrowing rate should have 1 point differential with the current mortgage.

Complete the remortgage during the first years of the loan

Indeed, the first years of a mortgage consist mostly in interest payments. As time goes by, the operation will be less and less beneficial.

Reduce the length of repayment

The remortgage is also a good opportunity to reduce the repayment length either by increasing the amount of the monthly payments or by completing a supplementary paid-up capital. Thus, with a loan of €150,000 made in April 2008 with a 5.05% yield on 20 years, the saving linked to the remortgage at the current market conditions (3.48%), rises to €27,946 if the borrower keeps the same length.
Lastly, do not hesitate to ask to a professional such as Sextant Mortgages in order to get simulations and see if the operation will seriously be advantageous.

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A vineyard and Spa estate, Saint Benoit offers both the ancient and the contemporary in its modern styled furnished apartments, with private gardens, set within the estate’s 12th century renovated gardens. Set in the heart of all this modernity is the estate’s reception centre which incorporates:

-    Restaurant/bar
-    Lounges and libraries.
-    Spa facilities with indoor and outdoor swimming pools, saunas and Jacuzzis.
-    Kids’ area.

These delightful apartments are €245,180 with a required deposit of 2% on agreement.

At Sextant French Properties, we can offer you a top quality mortgage service whether it be an interest-only mortgage, a traditional repayment mortgage or even a hybrid mortgage should you so require.

The property will be under the watchful eye of a management specialist with rents guaranteed on a 9-year renewable commercial lease and paid on a quarterly basis. The buyer receives 19.6% VAT cash back and the property can be offered on 5 different options from a pure investment (yields can be up to 4.5% per annum) or a 6-month personal use scheme that sees nil return on the investment but you can nonetheless enjoy the property all by yourself!

There are only a few units left in the estate so hurry now and make good on a great opportunity!

Our service:

1. We will collect the financial information from you and discuss it with our lenders to obtain an initial decision in principle free of charge

2. We will ensure that every step of the mortgage is handled promptly, efficiently and professionally. Fully independent, we can give you a free pre-application mortgage calculation to help in your search for a property, as well as making sure that the products quoted are the most competitive on the market, because we do not favor any banks. Most of our lenders give us preferential rates for that reason.

3. We will send you quotes through with the full details of the products and we will answer any questions or queries you may have

4. We will be liaising with the bank on your behalf – we work directly with the bank’s underwriters, which will smooth the process for you and save you a lot of time and struggle

5. We will be in direct contact with the lenders, and keep you updated all the time

Advantages of using us instead of going directly to the bank:

• Approaching a French bank for a mortgage can be very difficult particularly if you don’t speak French or you are not a French resident

• In-depth local knowledge of all documentation required for various lenders and mortgage process

• We can offer very competitive and exclusive lending terms

• We can pre-qualify your application before you start your property search to give you an idea of what you can afford and of the documentation is required

• We are the only mortgage broker from the UK to help with mortgages below €100,000

Little known secrets of the current French mortgage market

1. 100% LTV French mortgages**

2. Rates fixed for the entire term starting from 3.25%**

3. Some French products are capped at 1% above the initial rate, to give you more security

4. Interest only mortgages with variable rates starting from 2.75%

5. Rates starting from 2.45% for equity release and re-mortgage

* You would only be expected to pay the Notaire fees and the estate agent’s fees. Available only for properties of over €300,000

** Over a short term of 6 years on a repayment basis

*** Higher rates may be applicable for longer terms and different loan amounts

For more information related to French mortgages or if you would like to receive a free quote with no obligation, contact our in-house mortgage consultants by telephone: 0207 428 4918 or by email: info@sextantmortgages.com

If you would like to be among the first ones to discover the latest developments, you just need to register and wait to receive our email alert.

We hope that it will help you better in your French property search and feel free to send us your feedback: http://www.sextant-new-build.com

A fall in price of between 9 and 12 % in 2009
According to the Chamber of Notaires, talk in the spring of the early shoots of recovery has prevented property prices from crashing, actually causing sales to pick up a little – although still falling short of those recorded during the same period last year. Across the Paris region as a whole, the number of transactions fell by 24 % over 12 months, much less when compared with the 42% fall experienced over the fourth quarter 2008 and the first quarter of 2009. Initial findings seem to indicate that the fall in July may be no more than 14%.  With the Chambres des Notaires predicting a price drop of between 9 and 12 %, this would seem to indicate that the low point of 2009 was reached during the first half of the year and that things will continue to improve in the second half of the year.

Foreigner buyers responsible for 8% of property sales in Paris
According to the Chamber of Notaires, 8% of the property transactions in Paris during the first half of the year involved foreign buyers. This is consistent with trends in the market over the last five years, a 2.5% increase from the number of international sales taking place ten years ago. Paris remains a very desirable location, especially the quartier of Saint-Germain-des-Prés in the VI arrondissement where nearly 30% of sales are to foreign buyers. The spacial dimensions of the 17th century buildings in this area have enchanted buyers and pushed up prices with an apartment of 328 m² in Odéon recently fetching  9.456 million euros or 28 830 euros per metre squared. However even this area of Paris have been affected. The VI arrondissement, usually the most expensive area in Paris in which to buy property at around 9600 euros per metre, has nevertheless seen a 5.4% fall in prices over the year, slightly less than the average drop. The most desirable areas to foreign buyers are all at the very centre of the capital – the VI arrondissement (23.7 % of sales), the III arrondissement (18.8 %), the IV arrondissement (18.7 %) and the VII arrondissement (17.4 %).

click here to see our latest properties in Paris