Whether it’s new or second-hand, the motivational influences of the French buyer are more complex than before
Tax bill reduction. That is the prime motivating factor for French people investing in rental property. According to a study by specialist property lenders Crédit Foncier published last week, 77% of those quizzed investing in new property do it first and foremost for the tax relief it provides.
It has to be noted that a raft of fiscal programmes have been brought in by the Socialist governments to stimulate investment in property, thus creating lots of opportunities for investors.
“Investing in new builds also means having the assurance of a certain ease of mind: the building conforms to all the norms and no works will be required for several years,” adds Christine Vassal-Largy, director of propety advice bureau Thésaurus.
Although economics are at the heart of purchasing decisions, the location of the property is sometimes neglected. 51% of new-build investors seem to have a preference for regions that are far away from where they live – markets about which they know nothing, risking, according to Christine Vassal-Largy, “investing in zones where there isn’t a strong rental demand.”
In the second-hand market, the idea of buying a property to pay less tax forms only a small proportion of those surveyed – 24%. And yet, these people do end up with fiscal advantages, with two thirds of the buyers owning property near to where they live.
These buyers are also looking to build a nest-egg by investing in second-hand property (55% as against 45% for new-build investors), according to the study.
“The building of a portfolio of wealth is, as far as I can see, the main preoccupation of investors of both new and second-hand property. It’s the only way of building up one’s net worth without saving – using only credit facilities. As for second-hand, don’t forget the economic dimension: prices are 20% less on average than new property.”
However, whether it’s new or second-hand property, the buying seems to be concentrated on the same zones. 75% of property are in the southern half of France according to Crédit Foncier (specifically in the regions of Aquitaine, Midi-Pyrénées, Languedoc-Roussillon, Provence-Alpes-Côte d’Azur, Rhône-Alpes) and in the Il-de-France (which represents 18% of rental investments).
Almost all investment properties (89%) are apartments of 42m2 on average and costing €167,000. one third of investment properties are above €200,000. As for the buyers, according to the survey, they earn between €2,500 and €6,000 per month – incomes that allow certain borrowers to maximise their tax situations as half of properties are financed at 100% by mortgage lenders.
Bringing a complimentary income stream comes in third place in the motivational league table of investors in new property (42% of those surveyed). The possibility of getting rental income is an attractive one, particularly for younger people, as Ulrich Maurel – founder of brokerage Immoprêt – explains: “Some people, who are worried about not having a retirement fund, decide to invest in property early with the notion of being able to benefit from rental income in their autumn years.”
It’s a preoccupation shared by those who buy second-hand property too, as the idea of having a secondary income is the second-most motivating factor in their decision to buy (54% of those surveyed). After that, comes the wish to be able to pass on something to their children (36%).