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FRANCE - LAND OF PROPERTY OPPORTUNITY
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Buying a property in France, whether you intend to live there permanently, or to use it as a holiday or retirement home, is an prime investment opportunity.

Any dream second (or even first) home should also double as a dream investment. For if you do not subject its purchase to the same scrutiny you would employ before making an investment, you could end up owning something which will drain your resources.

***TOP PERFRORMER***

Why is the country such a consistently exciting performer?

Until the mid-1990s, the bulk of those buying property in France came from Italy, Germany and Holland. However, in the late 1990s British buyers became more numerous as they took advantage of the strong pound - and in some cases re-mortgaged their UK homes to release capital - and bought French property at comparatively low prices.

***BRITONS***

According to the French Tourist Office more than 500,000 Britons now own a property in France.

It is estimated that 60,000 of them purchased property in France in 2001 alone! Many are now permanent residents, still more have holiday homes and a sizeable minority have bought property there as an investment.

The property market in France has changed dramatically in the last 15 years. Previously the preserve of the seriously rich, advances in travel, technology and finance have thrown the market wide open.

***PROFILE***

There has been a change in the profile of the typical purchaser. Once, purchasers were mainly rich and middle-class retirees and skilled crafts people able to sell their skills abroad who were able to make a fresh start. But typical buyers are now much younger and, typically, in their thirties or forties.

Today's purchaser is more likely to be a professional who can use technology and communications to retain a job in the UK, but work from their home in France.

***BARGAINS***

And, because the number of buyers has increased, bargain properties in many areas are now much harder to find than they once were.

However, there are areas where it is still possible to find keenly priced property. In the main, they are in overlooked and slightly out-of-the-way places, such as the eastern and central regions.

***OPPORTUNITY***

There is a growing realisation that a second home in France is an investment opportunity, as well as an amenity, because:

Loans against French property are now relatively easy to obtain, both in the UK and direct from French lenders. All of this means that you can own a property which:

***PROSPECTS***

There was a sharp fall in the housing market in the 1980s, particularly in the south of France. The market recovered slowly until the mid-1990s. But has picked up strongly with average property increases of about 10% per annum, which accelerated to 15% per annum in 1998 and 1999.

At the moment the French market is attractive to foreign investors, and we will almost certainly see the numbers of non-French buyers increasing.

Those prepared to plunge into the market will be:

This last group is interesting. It will comprise a mix of working-age people who, through the use of technology and modern communications, are able to live and work abroad, and those who want a permanent, or semi-permanent retirement property as the baby-boomers near retirement age. Our experts tell us that 36% of those who leave the UK settle in France.

***BUYERS***

Potential buyers will not merely be from the UK, however. France is also popular with the Dutch, Belgians, Germans and others, which means that there is a potentially huge demand for property there.

This demand is being fuelled and sustained by:

***WHY INVEST?***

The government actively encourages property investment. Its main 'carrot' is a leaseback scheme, which allows investors to benefit from generous tax breaks on new property.

This reflects, in part, the fact that France attracts more visitors than any other country, and that its domestic rental market is significantly larger than that of the UK. Tax incentives are therefore used to ensure that France maintains its stock of quality rented properties.

***INTEREST***

With a surge of interest in French properties, particularly from British buyers, buyers are having to look away from the better-known areas to find cheaper properties.

These areas are mainly inland, for example the central regions such as Limousine and the Auvergne and parts of Burgundy, which are all ripe for exploration. And, in the southwest - away from the well-trodden path to the Dordogne - parts of Gascony are still relatively undiscovered.

***RETURNS***

Falling yields on UK property, especially in London and the South East, make buying French property for purely investment reasons more attractive for British purchasers.

Despite rises in French property prices, returns are still better on a like-for-like basis than for equivalent properties in the UK. Crunch the numbers and you'd probably find that a UK property with a gross return of 5% would yield 8% if it were located in France.

Serious investors are buying flats and apartments in city locations to let to students and lower income key workers. Traditionally the best areas have been Paris, the south of France and the Alps, but now all the major provincial cities, such as Lyon, Bordeaux, Montpelier and Lille are worth considering.

***PRICES RISING***

In the past, French property price inflation has lagged behind that of the UK and, in particular, well behind that of London and the South East.

Over the last few years, this has changed but even so you can still get a lot more for your money than in the UK. Also if you buy in relatively unknown areas, the property's potential for capital growth will be greater than that foreseen for many parts of the UK.

***INSIDE VIEW***

My insider sources in France tell me that in 2002 they saw growth of at least 10% in less established second-home areas and up to 40% in some areas.

Continued low interest rates and a shortage of properties for sale, will allow growth to continue throughout 2003, albeit at a slower pace.

***RISKS***

A second home in France can be your best investment if you buy the right property in the right area.

However, there is no such thing as a risk-free investment. Here are some things you must consider before buying.

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