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Is it better to buy or rent in France right now?

Property prices are expected to fall in France this year. But with the cost of living rising, is it a good time to buy? Or is renting the safest option? Here are a few points to consider.

Is it better to buy or rent in France right now?
Real estate signs on buildings in northern France in 2012 (Photo by PHILIPPE HUGUEN / AFP)

After two years of steadily rising prices across France, the property market is starting to change. Some experts predict falls of up to 10 percent in some regions in 2023, though new-build prices continue to rise.

However, there are several things besides property prices alone that are worth considering if you are trying to decide whether to buy or rent in France in 2023.

We’ve gathered a few points to consider for buying versus renting in 2023:

The market situation

France’s major cities have begun to see property prices fall. According to real estate companies, such as Century and the Fnaim, prices could drop by as much as five to 10 percent on average in 2023. 

The fall in prices has primarily impacted France’s large cities, like Paris, Lyon, Toulouse, and Nantes.

Thomas Lefebre, the head of Meilleurs Agents, told Le Parisien that prices will continue to drop in Paris, and that the price per square metre should drop below €10,000 by next winter, or even before summer if the spring is not as active as it normally is.”

France’s capital city has seen prices drop by approximately 1.2 percent in the last year, and experts predict prices to decline by another three percent in 2023. 

Even though prices are dropping, that does not necessarily mean that it will be easier to buy in France. In fact, the market has stagnated in many parts of the country, as interest rates rise, making sellers who bought with low loans reluctant to let go of their properties.

Amid inflation, interest rates for real estate loans have risen, and experts worry about market downturn in the coming year.

Loïc Cantin, the head of the National Federation for Real Estate (FNAIM), told Franceinfo that he expects to see interest rates rise to at least three percent or 3.5 percent by the end of 2023. 

According to Thomas Lefebvre, higher interest rates reduce households’ purchasing power, and by extension the ability for first-time home buyers due to strict lending requirements.

Cantin told Franceinfo that the current market situation risks causing a housing crisis, as more first-time home buyers could be locked into renting, which could cause “overcrowding in the rental market.”

READ MORE: A buyer’s market? How French property prices are set to change in 2023

On January 3rd, Century 21 announced that they have recorded four percent less transactions when compared to 2021. 

According to Bien’ici property ads are online for longer – 60.2 days on average recently, compared to 48.8 days in the middle of 2021.

Hidden costs 

Those looking to buy in France should consider the extra costs associated.

On such cost is a notaire fee can be up to 10 percent of the price of the property and most of it is really a one-off property tax, similar to stamp duty in the UK.

How to calculate notaire fees

Oftentimes, it is the buyer who is also responsible (though not always) for paying the real estate agent, rather than the seller. The price of the property includes the agent’s commission, which can range from 5 percent to 10 percent of the property value. 

Additionally, depending on where you are looking to buy property in France, you should consider whether it is a “growth area,” and be aware of the fact 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.

The hidden costs of buying property in France

New restrictions on energy efficiency

Currently, if you plan to sell or rent a property in France, you need to provide a Diagnostic de performance énergétique (DPE), which is a document that serves as an estimate for the property’s energy consumption.

However, as of January 2023, property owners have no longer been allowed to rent out the most energy-intensive housing – ranked as “G.” This applies only to new rental contracts that were opened after January 1st, 2023. 

This could lead to more properties being placed on the market, as landlords will no longer be able to rent them out, which would reduce available supply for renters. In strained markets, like Paris, this could have tangible impacts on the availability of apartments for rent. 

According to housing ministry, about 90,000 properties are impacted by the new energy rental rules. 

Those looking to sell homes that are classed either “F” or “G” will also have to produce an energy audit documenting plans for future renovations to improve energy performance. This will come into effect starting on April 1st, 2023. 

Read More: Nine things to expect when renting an apartment in France

Taxes

When considering whether to buy in France in 2023, it is important to consider where property taxes stand to increase the most. Renters, on the other hand, generally do not have to worry about property taxes in France, unless they are high earners (in which case, you may have to pay the taxe habitation – more on this below).

Several cities across France are also looking to increase property taxes in 2023. Taking Paris for example, the mayor, Anne Hidalgo, announced that she would be raising the taxe foncière – the tax paid by property owners – in 2023. The tax rate will rise from 13.5 percent to 20.5 percent in 2023. 

This would mean that the owner of a 50-square-metre property in Paris would see their property tax rise from €438 to €665 euros on average, according to calculations by Le Monde.

Additionally, those looking to purchase a second-home should consider additional taxes that could apply. For instance, local authorities in areas that are classified as having a housing shortage (zones tendues, in French) – urban areas of more than 50,000 inhabitants – have the ability to increase taxes (taxe d’habitation) for second-homes.

READ MORE: MAPS: Where in France has the largest number of second-homes

The rent cap

In an attempt to protect households from rising inflation, the French government passed a rent cap in August 2022 to keep rent increases to a maximum of 3.5 percent. As of January 2023, the rent cap was meant to remain in place until June 30th 2023. 

Rules on rent charges in France are also generally quite strict.  A landlord can only increase rent once a year if the lease agreement provides for it in a review clause. 

The initial rent charge must run for at least 12 months before any increase, and further increases can only occur 12 months later. You can read more HERE

Several cities have also begun efforts to hold landlords accountable for renting at prices that are non-compliant with existing city-wide rules for rent control. For Paris specifically, as of January 1st, tenants have been able to report rent that exceeds rent controls to the Town Hall. As of January 1, 2023, tenants can directly report a rent overrun to the City of Paris, who is able to sanction non-compliant landlords. You can find more information here.

Average rent prices

In terms of average rent prices in France, these will depend heavily on location and property size, as well as whether or not the space is furnished or unfurnished. 

As of January 2023, the average rent for a furnished apartment in France was €709 per month, and an unfurnished apartment was €671. For single family homes, the countrywide average was €985 per month for a furnished house, and €902 for an unfurnished one.

The government website Ecologie.Gouv.Fr has an interactive map that shows average rental prices across the country, and provides more specified information based on the number of rooms.

Your personal situation

In the end, the question regarding whether to rent or buy will reflect your own personal situation.

You will want to think about how long you plan to live in your new home, as this will determine whether the purchase price-to-rent ratio (rentabiliser, in French) is actually worthwhile. 

As of 2021, when looking at the entire French country, the website Meilleur Taux found that it took on average three to five years for a property that is 70m2 in size to become “profitable.”

As for Paris, it took between five and 20 years to financially recover after buying a 70 square metre apartment. 

You can go on their website to access a simulator that will help you see how long it will take for the property purchase you are considering to pay off. 

The Local spoke with financial expert Maeve Hoffman, a partner at Spectrum-IFA Group, about investment opportunities for foreigners living in France, and she warned that those looking to invest in property should be aware of “the potential for wealth tax if we are talking about significant assets, rents not being very strong, capital growth not being very large outside of the big cities,” and the fact that “renting can be a nightmare as the legislation is in favour of the tenant.” 

Ultimately, the decision to buy or rent is deeply personal and it depends on lots of factors aside from money, such as where you want to live, who you are living with and what makes you feel most stable.

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If you’re considering buying, check out expat forums or talk to friends who’ve bought a place in France to find out their experiences. And make sure to get in touch with a professional financial adviser or mortgage adviser for guidance before you take the plunge.

If you’re moving to France from another country, it might be better to rent first to establish whether you really like the area and whether it has all the things that you need.

Checklist: 10 things to consider before moving to France

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SECOND HOMES

New French property tax declaration – your questions answered

This year the French tax office has announced that property-owners have to complete an extra tax declaration - from the rules for non-residents to second-home owners, we answer your questions on this.

New French property tax declaration - your questions answered

In 2023 there is an additional requirement for anyone who owns a home in France – they must fill in a one-off Déclaration d’occupation, stating whether their property is their main residence or a second home.

The reason for this is changes to the tax system that are gradually phasing out taxe d’habitation for all but the highest earners – with the exception of second homes.

You can find a full explanation of how to file the declaration HERE.

Many of our readers have contacted us with questions about this new requirement, so we’ve answered some of the most frequently-asked here;

Do I still have to do this even though I don’t live in France?

A fairly sizeable number of people own property in France (usually holiday homes) but live elsewhere, such as the UK or the US. If you don’t live in France or have income in France you probably won’t have to do the annual income tax declaration, but the Déclaration d’occupation is different.

It concerns anyone who owns property in France, including second-home owners who live in another country.

Do I have to do this even though I pay all my taxes in another country?

If you own property in France you probably do, in fact, pay tax here – property taxes. Bills go out every autumn for the taxe foncière (the property owners’ tax) and taxe d’habitation (the householders tax) – and second-home owners would usually pay both. You may also receive a bill from your commune for waste-collection services, although the annual TV licence bill (which used to be sent out at the same time as the property tax bill) has been scrapped this year.

If you own property in France and have never paid property taxes, it might be worth a trip to the local tax office to check that you are registered correctly, as almost all property owners are liable for property taxes.

Do I have to do this every year now?

No, this is a one off. You complete the declaration this year (before June 30th) and then you don’t have to do it again until your situation changes – eg a second home becomes your main residence.

Why do we have to do this?

It’s because of changes to the tax rules. Taxe d’habitation – the occupier’s tax – used to be paid by virtually everyone, but is now gradually being phased out for all but high earners. The exception to this is second homes, so the tax office needs to know whether your property is used as your main residence or a second home so that they know whether to send you a bill in autumn.

Does this mean more taxes?

No, the declaration is purely for information – if your property is a second home you will continue to get your annual taxe d’habitation bill as normal, if it is a main residence you may receive no bill or a reduced bill, depending on your income.

What about commercial property?

If you own commercial property such as a workshop, bar or retail premises, then this does not affect you, the tax declaration is in relation to homes.

It’s all about clearing up the property status for taxe d’habitation, and you don’t pay this type of tax if it is a commercial premises.

What about gîtes, holiday homes or Airbnb properties?

It’s really all down to what you use the property for – if you run it entirely as a business it should be registered as a business and is therefore not concerned by this.

If the property is your home and you occasionally rent it out on Airbnb (say, when you’re on holiday) then it still counts as a home and you will need to complete the déclaration d’occupation. Be aware that certain areas, including Paris, limit how many days per year you can rent out a property on Airbnb without registering it as a business.

Some people keep properties mostly for their own use as second homes but sometimes rent them out for extra money – be aware that if you do this, you may need to register as a business and declare any income received – full details here.

Can I just ignore it, or tell them my second home is a main residence?

Ignoring or lying to the tax office is generally quite a bad idea whatever country you’re in – they can get quite cross.

This sounds like a massive pain

Welcome to France – home of bureaucracy! Paperwork is a fact of life in France and that’s probably unlikely to change soon. If you’re already registered in the impots.gouv site then this is one of the more painless admin tasks – a couple of clicks, fill out the form and file it online and you’re done.  

If you have questions on the property tax declaration, you can email us on [email protected] and we will do our best to answer them

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