With interest rates dwindling to next to nothing, now is the perfect time to invest in a holiday home, says Penny Zoldan…
Now really could be a good time to buy a property in France for many of you. If you have a deposit of 20% plus the costs, which will amount to around 3% to 5% for new / offplan purchases and 6% to 9% on resale properties, then you really should be thinking about buying right now. Unless you are lucky, you will now be earning less than 0.5% in interest so that, instead of your savings growing, they are, in effect, being eaten away by inflation, which in the future will make it less possible for you to achieve your dream of owning a second home in France.
Admittedly the euro is stronger than this time last year – at the time of writing the exchange rate is €1.13 to the pound – but many currency experts expect that, during the coming two to three months, it will improve to the €1.25 – €1.3 level of last year. And, if you buy now, you won’t have to pay the full amount for another couple of months, when it may have improved.
If you are planning on taking out a mortgage on the property, your currency exposure is much lower as you will only have to exchange the deposit now. Obviously, the mortgage will need to be paid on a monthly basis but you will be able to buy euros as and when you need them and the currency companies can advise you on future rates as well as arrange for a regular sum to be sent to your French bank account to pay the mortgage.
If you are lucky enough to be a cash buyer, you could even take out a mortgage until the exchange rate improves, then you can pay back your mortgage when the rate is better, which will make the property cheaper than when you bought it – i.e. if the mortgage is €100,000, it will cost you �88,500 at current rates, but if the rate improves to €1.3 and you decide to pay off the mortgage, you will only have to pay back �76, 923 – a saving of �11,500 on the original purchase price. And if the rate stays as it is, then you can continue paying on a monthly basis until such time as it does improve – it really is only a matter of time.
Low interest rates are not the only reason to buy now. In fact, the credit crunch is great news for househunters;
• Prices are lower and more negotiable
• There’s a larger choice of wonderful properties and you’ll receive more attention from agents as they aren’t as busy as they were this time last year
• You can get great deals on air fares and ferry crossings and several hotels are offering discounted rates
• Renovation projects are getting cheaper as artisans and builders lower their quotes to secure work
• You’ll be able to use your property for holidays this year, saving on accommodation costs which have shot up with the disadvantageous exchange rate. Not to mention the extra benefit of being able to buy fresh food in the markets and cook or barbeque at home, so saving on the expense of eating out for every meal, as you would in an hotel
• With your own property, you will be able to choose which days you travel, so you can take advantage of the cheaper midweek fares.
• You could even make your property earn its keep by renting it out when you aren’t using it.
Obviously, the income from this will vary, depending how long you rent it out for and when. If you are serious about earning money from your property, then find out when the demand is highest in your area – for most areas it will be the during the summer holidays; for skiing, the winter months with peak rentals during school holidays; or for some areas that host seminars and festivals, you will get bonus months – Cannes with its film festival and various seminars and Aix en Provence with its music festival are two such examples, but towns throughout France all have their day in the sun.
There are antiques fairs, truffle markets, flower and lemon festivals and so on. The rent you receive could cover your mortgage and more if you make a serious effort. You can do this by advertising in the various magazines and on websites in the UK as well as through local French agencies who will manage the property for you if you wish.
• Having bought your property at a well-negotiated price, and while you are enjoying it and receiving an income from it over the next few years, you should actually make a capital gain, which is exactly the opposite of what will happen to your deposit if you leave it in a bank at current interest rates. Meanwhile, you’ll be able to escape from the doom and gloom of the current climate in the UK – possibly prolonging your life!
So while everyone else is sitting back, listening to bad news and licking their wounds, why don’t you get out there and find the property of your dreams? The enjoyment of your purchase is going to make you feel so much better.
To illustrate the point still further, several owners have now reduced their prices, to the extent that the property is now cheaper than it was this time last year – when the exchange rate had yet to fall. For example, we have a beautifully renovated three-bedroom apartment in a typical Basque-style building, with two rear terraces in the sought-after coastal town of St Jean de Luz (Pyr�n�es- Atlantiques) which has just been reduced from €600,000 to €500,000.
Meanwhile, a turn-of-thecentury mansion set in an acre (3,900m2) of grounds with swimming pool plus an 80m2 self-contained apartment near Avignon has been reduced by almost 50% to €978,500.
Perhaps the most impressive reduction but not necessarily the biggest bargain, is the €1m knocked off the asking price for a ch�teau on the C�te d’Azur. Buyers will still have to find a healthy €6.9m to snap this up, however. More affordable is a south-facing bungalow with swimming pool in a 500m2 garden and lovely views near Mandelieu, reduced from €498,000 to €460,000.
And ski property isn’t immune either. The starting price for a chalet on a new development of five traditional chalets recently dropped from €862,000 to €700,000. Each chalet shares a swimming pool and the development is ideally situated close to ski slopes. €700,000 will buy either of the two four-bed duplex chalets, although you might want to upgrade to the south-westfacing luxury chalet with large south-facing terrace and spectacular panoramic views over the surrounding mountains and ski pistes – now just €950,000, reduced from €1.2m. Due to its location and the arrangement of the living space, this property has strong rental potential.
Not all asking prices have been reduced, as some of the properties currently on the market were correctly priced from the outset, while other owners have not reduced their asking prices but are more than willing to negotiate heavily.By Penny Zoldan.