Attractive Financing Fuels French Real Estate Recovery

The ability to access up to 100% financing at attractive rates, in contrast to tight UK lending conditions, is proving a powerful lure to British investors eyeing French …

The ability to access up to 100% financing at attractive rates, in contrast to tight UK lending conditions, is proving a powerful lure to British investors eyeing French real estate. The favorable French lending terms, and promising investment yields, have translated into an increase in residential prices for the last month. This is just one more signpost on the road to a recovery for 2010. See the following article from Property Wire for more on this.

Residential property prices in France increased by 0.1% in September and are now 2.8% higher than they were six months ago, according to the latest figures.

Analysts believe that the real estate recovery is now underway as the figures from the FNAIM show that although prices fell overall by1% in the third quarter they rose in September and for the last six months they are now up by 2.8%.

Overall during the last 12 months prices in the French market have fallen a total of 7.8% and there is much optimism that the upward movement in September will be the start of a trend that sees the country’s real estate market recovers in 2010.

A healthy lending environment is also expected to aid the property recovery. Unlike the UK, a history of prudent lending in France where lenders do not allow borrowers’ total outgoings on finance payments to exceed one third of their total gross monthly income, has meant mortgage finance is still readily available.

While mortgage finance in the UK remains extremely difficult to secure, especially at higher LTVs, the French banks continue to lend to borrowers with smaller deposits, even up to 100% LTV.

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This level of LTV is also available to foreign buyers both for second homes and investment properties.

As a result interest in the French property market from UK based investors is soaring as a result, with broker Athena Mortgages reporting a 21% rise in mortgage inquiries in the third quarter of the year compared with the second quarter.

Mortgage completions in the third quarter were up 14% on over the previous three month period. Many British property investors are now looking across the channel to add to their portfolios given the difficulty securing competitive finance at home.

The buy to let sector in France is attracting interest from property investors as depressed prices are boosting yields significantly in many areas.

In the Normandy town of Alençon, for example, gross yields are 7.5%, while in the medieval town of Poitiers, western France, they are currently 7%. Nevers in central France boasts the highest gross yields of 7.6%.

Other towns will good prospects are Clermont Ferrand in central France at 6.8% and Tours in the Loire at 6.4%.

In some areas prices are significantly lower with popular destinations such as Biarritz in the south west and Cannes, Perpignan and Nice in the south of France all with properties that are 10% cheaper than a year ago.

For a growing number of British property investors, France is fast proving the place to be, particularly given the availability of 100% mortgages, which circumvents the punitive exchange rate.

While the UK property market remains very difficult for investors to access given ongoing lending constraints, there is now a real appetite to lend among the French lenders,’ said John Luke Busby, director, Athena Mortgages.

‘With extremely competitive borrowing rates, attractive prices and genuine product innovation, there’s a real buzz to the French property market at present,’ he added.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.


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