Worried she was priced out of the French capital, Gabriella Castelmore discovered a surprisingly effective way to own a home there
This is my second time living in Paris. I spent a year here when I was 23, immediately after finishing my university studies in Australia. Having grown up in the Australian bush, finding myself living within sight of the Eiffel Tower was a life-changing experience. More than anything, it was the elegance and sophistication of Paris that I adored – the tree-lined avenues and boulevards, the symmetric white-gravel gardens and the crowded bistro terraces, all laid out in the shadow of some of the world’s most admired monuments.
Having finished my year as an English teaching assistant, I was heartbroken to leave (in more ways than one but that’s another story) and never imagined I’d have an opportunity to come back. But five years ago, having spent 20 years moving around the world, I found myself, ecstatically, back in Paris for work.
This time, I determined that a piece of the city should be mine, and project ‘Purchase small but perfectly formed investment apartment’ began. Step one was to get together the deposit. This took four years. During this time, I researched the market and had a clear idea of what I wanted, what I could afford and where, but didn’t take my investigations any further.
At my first viewing, however, I got a nasty surprise when the estate agent informed me that if I was to rent my apartment out (indeed the plan), a ceiling on the amount I could charge would be imposed by the ‘mairie’ (town hall) of the arrondissement in which I was buying. The rental limit is fixed per square metre and varies from one arrondissement to the next. Hmm… I didn’t see that coming.
The problem was I didn’t have access to an interest-only mortgage – these are far harder to secure in France than in the UK – and would be obliged to take a repayment mortgage. This meant that the difference between the rental income and the monthly payments on a one-bedroom apartment in the Gros Caillou neighbourhood of the 7th arrondissement, where I had my heart set on buying, would be too great for me to cover.
The estate agent said that many people ignored the ceiling set by the authorities and that while landlords weren’t automatically tracked and fined if found guilty of flouting it, random checks were on the increase. Regardless, I had no desire to break the law.
No sooner did my heart sink, however, than it bounced back up again. The estate agent explained that there was a way around the rental ceiling – to rent my apartment out as a furnished corporate let to a large company who would use it to accommodate executives coming to Paris to work for a year or two.
I immediately liked the idea because the company that hired me to work in Paris had provided the services of a relocation agency who, in turn, had worked with a corporate lettings agency to find me an apartment to rent. So I knew the process.
The coming months were a rollercoaster of emotions. At the age of 52 I was delighted to secure a fixed-rate mortgage for the entire term of the loan… 20 years! I had an idea of the interest rate at the outset and it came in at the end at 1.2%. Happy days.
Highs and lows
The unexpected challenge, however, was to find the apartment. I came to learn that Paris is a very unique market, mainly because most people want to live on the upper floors of an apartment building, i.e. the fifth, sixth or seventh floors in order to get light, but only 25%-30% of buildings in Paris have lifts.
With interest rates so low, demand is extremely high, while supply is just as low. In addition, the beautiful facades of the Haussmannian buildings belie many a rathole, with renovated apartments being the exception. That said, with demand being what it was, this was irrelevant. Prices were set by square metre, pretty much regardless of the condition of the apartment. What took me a little longer to learn was what I needed to do to actually secure an apartment once I finally found one that I liked. Demand is so high that apartments are being sold before they’re advertised.
To get in on this game, I viewed apartments I wasn’t interested in, simply to meet (and charm) the agents, convince them that I was a credible buyer, and tell them what I was looking for. My strategy paid off. Some 11 months into my search I got a call from an agent I’d already met and built a rapport with, who said she had a ‘bijou’ for me to see. Indeed she did. It was 32.5sqm, in the sought-after Gros Caillou neighbourhood between the Eiffel Tower and Les Invalides. It was on the seventh and top floor, had two lifts, overlooked a courtyard so was quiet and, for good measure, had a view of the Arc de Triomphe from the bathroom! I knew if I hesitated or tried to negotiate I’d lose it so after 30 minutes I offered the asking price.
The future’s bright
Four months later I had the keys; I had it freshly painted and furnished it with good quality pieces brought over from my favourite London shops like Lombok, OKA and the White Company by a driver from Anyvan.com whose prices were very reasonable.
I contacted the relocation agency which had helped me find the apartment I live in today, and they gave me the contacts of some corporate lettings agencies they knew and trusted. Not only did they find me a tenant, they also gave me excellent advice and contacts to help minimise the tax I’d pay on the rental income.
The apartment was rented to an executive who was moving to Paris from Berlin for a couple of years with a pharmaceutical multinational. As the company pays the rent, the risk of finding myself in a situation where the tenant stops paying and won’t leave the apartment, is pretty much non-existent – a good thing in France where the law is highly protective of the tenant.
From start to finish, the project took 14 months. The rent I pay on the apartment I live in (where the rent is, of course, fixed by the local town hall) is only a few hundred euros more than the rent I get on my investment apartment, but it’s twice the size. So I can justify not living in the 32.5sqm myself!
In terms of the future, never knowing what it might hold of course, at best I’ll have a beautiful pied-à-terre in Paris (as my dream is to retire in Provence) and at worst, I’ll hold an investment in one of the world’s sought-after stable property markets until I retire.