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ECONOMY

Is now a good time to buy a home in France?

Looking to buy your dream home in France, but not sure whether it is a good time? Here's a look at the current state of the property market and the financial factors that you will need to take into consideration.

Is now a good time to buy a home in France?
Photo by MOHD AZRIN on Unsplash

For most people the decision on when to buy a house rests more on personal factors – getting a new job, retiring, starting a family etc – but you still want to make sure that it’s a good time financially.

Here’s a look at the factors that are currently influencing the French property market.

The French economy

Amid rising inflation and a cost of living crisis due to the ongoing war in Ukraine, French officials, such as Bank of France governor Francois Villeroy de Galhau have begun issuing warnings that the country may be headed for a “limited recession” next year (2023). 

Meanwhile, the European Central Bank (ECB) announced an unprecedented increase in its key rates (0.75 points) on Thursday. This decision marks the biggest interest rate rise in the ECB’s history, as the eurozone economy attempts to cope with inflation.

Whether or not the market is currently in your favour depends largely on whether you plan to purchase your French home with a mortgage or without one, as well as the currency that your assets are in. 

Buying with a mortgage

It is most likely not a good time to begin the process of buying a home in France with a mortgage, though of course this depends on your individual financial situation and employment status.

As the ECB increases key rates, interest rates in France are also expected to rise, explained Laurence Scialom, a professor of economics at the University of Paris Nanterre to Franceinfo

In France, average borrowing rates had already risen from 1 percent in January to 1.9 percent in early September. These rates could reach 3 percent by the end of the year, according to estimates by France télévisions. 

Additionally, lending requirements – which were already strict – are set to become more stringent. Between spring and fall of 2022, nearly one out of two mortgage applications were denied.

For first time buyers, buying will become even more complicated. The president of the Century 21 network, Charles Marinakis, told Le Monde that “first-time buyers could be pushed out of the market” because living wage is “a determining factor for obtaining a loan.”

Scialom explained that for banks, the cost of living crisis will necessitate stricter requirements for loan applications “because many people will face an increased financial fragility.”

Buyers in precarious financial situations will also have to strongly consider the presence of other fees and taxes. 

Buying without a mortgage

If you are looking to purchase property in the coming months, but you plan to do so mortgage-free, then your situation is very different to the one described above. 

If France does indeed enter a “limited depression,” this would likely lead to a decrease in real estate prices, making it cheaper for you to buy. 

Additionally, if you are American, you could benefit the euro to dollar exchange rate. The single currency is currently trading at near parity with the dollar, which is the lowest level in over a year. In comparison, on January 1st of 2021, the exchange rate was €1 EUR = $1.2134.

However, the ECB’s goal with raising key rates was in part to increase the strength of the euro to the dollar. It is possible the exchange rate will begin to move toward a stronger euro in the coming months. While the exchange rate will not return to 2021 levels over night, it would still be advisable for Americans looking to buy in cash to take advantage of the current exchange rate while it is still in place. 

Property prices in France

The association of French notaires published a report on September 6th, which indicated that during the last year the price of houses and apartments in France has increased by nearly 7 percent.

When looking at 2021 trends, apartment prices increased by approximately 5.2 percent, while houses went up 9 percent, according to Nexity. These figures tend to confirm the trend of buyers seeking out homes in the countryside rather than apartments in city centres in the periods following lockdowns during the pandemic.

These tendencies remained somewhat present in 2022 as well. Specifically by region, the Provence-Alpes-Côte d’Azur département saw real estate average prices per metre increase by 15.5 percent between 2021 and the first half of 2022. Brittany also saw large increases (+13.2 percent). 

In Hauts-de-France, Pays de la Loire, and Île-de-France (excluding the city of Paris), prices decreased marginally by 0.1 percent, 0.2 percent, and 0.4 percent respectively. 

MAP Where you can buy a house in France for less than€100k

The table below shows the evolution of prices for apartments in Ile-de-France, according to French daily Le Parisien, as of September 1st.

When looking ahead, the European market as a whole “remains characterised by a limited real estate supply and a still strong demand for housing” explained chief economist for S&P, Sylvain Broyer to Le Monde.

“Supply is very inelastic in relation to demand, and when demand falls, many sellers withdraw their properties from the market rather than sell at a price lower than their expectations; this is typically the case in the Paris market and in the major capitals.”

The economist predicts that property prices across Europe – and including within France – will rise more than household incomes in 2024. He expects that rising interest rates will be particularly problematic for “first-time buyers, young people and less well-off households.

As for Paris specifically, prices are increasing at a lower rate than the other parts of the country. The real estate firm Meilleurs Agents released data showing that as of September 6th, 2022, real estate prices in Paris had decreased by 1.2 percent in one year. 

Other costs

As well as the price of the property, there are some other costs to take into account, the biggest of which will probably be the notaire fee.

Despite its name, only a small portion of the notaire fee goes to the notaire handling your sale, the rest goes to the state so really it’s a property tax.

CALCULATOR How to work out your notaire fee

There’s also the costs associated with the purchase such as real estate agent fees, and once you have the property you need to remember to budget for the two annual property taxes.

REVEALED The hidden costs of buying property in France

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PROPERTY

Courtier: Should you hire a broker when buying property in France?

If you're researching the French property market, you might have come across mentions of 'courtiers' - here's what they do and whether they are necessary.

Courtier: Should you hire a broker when buying property in France?

The French ‘courtier‘ is usually translated as a broker, and the Notaires Association describes their role like this: “the broker is a true intermediary in banking operations. His/her role is to negotiate the best rates for you, but not only that: they will also find the most advantageous financing conditions for the realisation of your project.”

Essentially they act as an intermediary between you and the banks, so they’re only required if you need a mortgage or a loan in order to buy your French property. 

Their job is to research the best deals for you and then to help you put together your application and ensure that all your paperwork is correct – unlike the notaire, instructing a courtier is not a required part of the process, so the decision on whether to instruct one is up to you. 

So is it worth it?

Among French buyers, around 30 percent of mortgages are obtained using the services of a courtier, and this rises to 60 percent among young, first-time buyers, who generally find it harder to access credit.

Some of things to consider are your level of French and confidence in negotiating French bureaucracy, your financial situation (since French mortgage lenders tend to be stricter than those in the UK or US) and whether you currently live in France or not (since there are extra hoops to jump through for overseas buyers).

READ ALSO Is now a good time to buy a home in France?

“Things have changed,” Trevor Leggett, group president of Leggett International estate agents, told The Local. “It’s now more important than ever to work closely with a reputable broker.

“In France it is all paper-based, very old-school and extremely bureaucratic, a different world entirely to the UK. Preparing the client “dossier” so that it will be accepted is an art form.”

READ ALSO MAP: Where in France can you buy property for less than €100k?

He advised non-resident international clients, particularly, who may not be au fait with the French system to seek the help of a broker who knows the ropes.

“The question is no longer really about savings,” he said. “It is about finding a bank that can actually lend to the client profile, interests rate are secondary. 

“It occasionally happens that one bank can be played off against another, or to shop around, but it’s a rare event nowadays.”

READ ALSO Revealed: The ‘hidden’ extra costs when buying property in France

And he had no hesitation in recommending that prospective buyers find a broker to sort out the financing.

“The lending market has tightened for international buyers and a good one is worth their weight in gold,” he said.

READ ALSO EXPLAINED: Time-frame for buying and selling property in France

In France, you make an offer on a property and then you begin the mortgage process (while in the UK it’s the other way round) so problems in getting your mortgage approved could lead to you losing your dream property.

“[Using a courtier] can be the difference between buying and not,” added Trevor.

“It’s not just any possible language barrier – but understanding the process and the different players in the market.”

How much?

The cost of hiring a courtier is borne by the buyer – but how much do they charge?

The courtier usually charges a percentage of the total mortgage amount – fees must be fixed in advance and are only payable once your mortgage application has been approved. 

Fees vary between different areas and different businesses, but the average fee is €2,000, which amounts to around one percent of the purchase price.

Many brokers set a minimum amount – around €1,500 – for smaller loans, and take a percentage of larger loans, so how much you pay depends on your property budget. 

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