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Rent or buy? What you need to know about France’s changing property market

Is it always better to buy, or are there areas in France where renting actually pays off? We break down the latest trends of property prices in 36 cities.

Rent or buy? What you need to know about France’s changing property market
Strasbourg is one of the cheapest French cities for buyers/Illustration photo: Patrick Robert Doyle on Unsplash

Looking at France's buoyant property market, with its seemingly always-rising prices, it's easy to think that buying an apartment is always a good investment, especially when the alternative is renting.

Even if you need to take up a loan to seal the deal, you will be paying your bank for something that you now own rather than paying your landlord to borrow something that's not yours.  

But some new trends in the French housing market have made things a bit more complicated, and there are several areas where you should think twice before investing in that dream house or apartment.

MAP Where in France has the best standard of living?

1. Buying is generally best..

In the long run, buying is generally a better investment than renting in all parts of France. However how long it takes for a buy to pay off, depends on the city. 

“In some cities, if you rent for more than two years you begin to lose money,” said Maël Bernier, Spokesperson at Meilleurtaux, a French company that specialises in property prices.

Meilleurtaux recently conducted a study comparing the prices of 70 square metre apartments in France's 36 biggest cities in 2020. 

READ ALSO 9 things to expect when renting an apartment in France

They found that the average time before an investment into a 70 square metre apartment starts to pay off – that is to say, when renting becomes more costly than buying – was 3 years and 5 months in 2020. But the study revealed big discrepancies between areas of the country.

In middle-sized cities such as Perpignan, in Le Havre, Caen and Rouen, those investing in a 70 square metre apartment in 2020 rather than renting would see it pay off it in just one year. In Paris, a city infamous for its steep property prices, the estimation was 13 years. 

READ ALSO Property prices: The cheapest areas of France to move to

 

Buying in France is a generally good deal, Bernier told The Local. For foreigners looking to make an investment it can be extra lucrative, she continued, as France is one of the few countries where banks operate with fixed rates. Whereas the property's value normally would increase over time, the mortgage rate would stay the same.

“What you are paying will never be affected by inflation, it is very safe,” she said.

2. .. but not always

Paris is one of several French cities where property prices have spiralled over the last yeas while rents have remained stable. Just one year back, in 2019, the time for a purchase to become profitable in the capital was shorter by more than 5 years (it would take 7.5 years before buying that 70 square metre apartment became more lucrative than renting).

Another example is Lyon, where property prices also exploded while rents stayed the same. Whereas in 2019, it would take 7 years and 6 months for a property investment to pay off, buyers in 2020 will have to wait 18 years before gaining back what they spent. 

The same goes for Bordeaux – 12 years and six months – and Nantes – 8 years and 2 months – or Annecy, which is one the Swiss border and has seen property prices spike due to the many French who work in Switzerland and therefore get paid more.

“In purely financial terms, buying in one of those cities is not very cost-effective,” said Bernier, adding that it all depended on different factors such as “if you want to stay for a long time, if you really want to own a property, if you really feel good in it.”

The map below shows how many year it would take before buying a 70 square metre apartment becomes more profitable than renting in each of the 36 cities included in the study (green signifies short time and beneficial property markets, red signifies long time and expensive market).

 

Photo: Meilleurtaux

3. The ‘Paris exception’

Despite being the priciest city of all, Bernier said that investing in a property in the French capital was generally a good idea.

“Buying in Paris is not a bad thing. People who could have invested years ago but didn’t, regret it now,” she said.

However there are some exceptions. Depending on the size of the loan, borrowing from the bank could cost you more than it would if you decided to stick with renting. 

The average price per square metre in the capital was at  €10,593 a few weeks back, according to Meilleurs Agent, an agency analysing the French property market.

In comparison, one square metre cost €4,980 on average in Lyon, €2,943 in Marseille and €2,990 in Montpellier – all big cities with relatively high property prices.

On average, it takes Parisians between five and 20 years to financially recover after buying a 70 square meter apartment. In the 7th arrondissement, the second most expensive it takes 16 to 20 years for a property investment to actually pay off. 

4. The game changer: Covid-19

This could potentially change, thanks to Covid-19. 

The pandemic has turned the world upside down, and it has even slowed down France’s booming property market.

While the market bounced back quickly after the spring lockdown, the two months of practically economic standstill had property price rates set to drop (slightly) for the first time in years in several areas in 2020, according to a report by Notaires de France. 

Paris was one of the cities affected.

“During lockdown, there was the big idea that Parisians would leave the city, and now it is happening for real,” Bernier said.

By changing how we live and work, the pandemic has pushed a rising number of Parisians to think seriously about swapping their cramped apartments for more space and greenery outside the city. That did not mean prices in Paris dropped, but it did mean they grew more slowly than predicted this year.

READ ALSO: What's happening to house prices in France amid the coronavirus crisis?

But other cities were affected too, as more people sought to move out of the centre to calmer places that were well connected to the city (Bernier called it the 'TGV effect' after France's high-speed train lines). This had lead market prices outside cities such as Lyon to rise.

Although it may be more profitable to buy in the long run, it is important to keep in mind certain costs that have to be paid when you invest in property.  

5. Market speed

One thing that buyers should be aware of it that properties don't always sell quickly in France, especially in rural areas. So if you are thinking of buying a property as an investment and then selling it after a couple of years, bear in mind that it could be on the market for some time, which you would need to factor in to your financial calculations.

For more about buying and renting in France, check out our Property section HERE.

 

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PROPERTY

Property taxes: How much will it cost to extend your French home?

Installing a swimming pool, building a garden shed, or adding a conservatory to your French home has become more expensive in 2023.

Property taxes: How much will it cost to extend your French home?

If you are planning a renovation project in 2023 you’re likely looking at rising cost for materials and labour due to inflation – but there is one other cost to consider; taxes. 

In France there is a one-off tax that has to be paid on certain building works, and the government has raised the rate for this.

The taxe d’aménagement, sometimes referred to as the garden shed tax, applies to all property development – construction, reconstruction and extension – of buildings that require planning permission or a building permit.

Garden sheds, swimming pools or extensions with a surface area of more than 5 square metres are subject to the development tax – although a 50 percent reduction is applied to the flat-rate values of certain buildings, particularly the first 100 square metres of main residences.

READ ALSO Everything you need to know about installing a swimming pool at your French property

The tax is collected by local councils, who set their own percentage rates for the tax, working off the base rate set by the government.

A decree published in the Journal Officiel set the base figures for 2023 at the following rates: 

  • €1,004 per square metre in Île-de-France (up from €929 per square metre in 2022);
  • €886 per square metre outside Île-de-France (€820 per square metre in 2022).

The flat-rate values per square metre of building space, which constitute the basis for the development tax, are revised on January 1st of each year according to the latest construction cost index published by national statistics body Insee. 

Additionally, specific rates are set for:

  • €250 per square metre  for a swimming pool (up from €200 in 2022);
  • €12 per square metre of ground-fixed solar panels (up from €10 in 2022);
  • €3,000 per wind turbine more than 12 metres high;
  • €3,000 per pitch for tents, caravans and mobile leisure homes;
  • €10,000 per pitch for a holiday chalet or bungalow.

The amount of the tax is calculated according to the following formula: 

(Taxable area multiplied by the government-set base figure) multiplied by the percentage tax rate set by the local authorities. This gives the total to be paid in cents. Bills are rounded down.

So, the tax for a 30 square metre extension in an area where the combined local and departmental tax rates total 6.25 percent would be calculated like this:

30 (the size of the development) x 886 (the base tax rate outside Ile-de-France) = 26,580

6.25 (local and departmental tax) x 26,580 = 166,125 cents, more usually expressed as €1,661. 

If the total payable is less than €1,500, you will receive a bill in the six months after planning permission was granted, with details of how to pay.

Otherwise, it is paid in two instalments, 12 months and 24 months after authorisation, with a 10 percent surcharge applied in cases of late payments.

READ ALSO The hidden costs of owning property in France

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