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Sales of prime property in France set to exceed a million in 2019

Sales of top end property in France have strengthened since 2015 and are set to exceed a million for the first time by the end of 2019, according to a new analysis report.

In Paris, prime prices will be further boosted by the Grand Paris Project, Europe’s largest infrastructure over the next decade and by the 2024 Summer Olympics, says the Prime France 2019 report from international real estate firm Knight Frank.

It also reveals that British buyers now account for one in five prime purchasers in France, down from three in five in 2014. Belgian, Scandinavian and Middle Eastern buyers as well as the French themselves have filled this gap in the prime sector.

Overall, German, Scandinavian and Belgian buyers are active, helping offset a decline in British purchasers whose buying power has been hindered by the weak pound and Middle Eastern buyers are active in the South of France whilst Paris has seen a rise in buyers from the US and South East Asia.

‘Due to the weak pound we had expected to see more British home owners with prime property in France sell up and capitalise on the EUR/GBP exchange rate but there is little evidence of this to date,’ the report says.

It points out that new homes in France come with added appeal provided buyers adhere to certain stipulations. TVA (VAT) of 20% is refundable on newly built or off plan properties while transfer tax is limited to 2% instead of the usual 7% for resale properties.

It also points out that France remains the most visited country in the world with over 89 million arrivals in 2018, providing a reliable pool of rental demand for second home owners. Indeed, around 70% of Knight Frank’s second home buyers in France aim to rent their property, a marked shift from a decade ago.

‘Buyers are becoming more financially savvy opting to rent their holiday home to help cover costs, but most do so without the expectation of a high yielding investment,’ the report explains.

The data also shows that enquiries for French homes increased by 33% and sales by 63% in 2018 year on year, based on Knight Frank data. This momentum and positivity has continued in 2019, with a number of record prices set in Paris and on the French Riviera in the first half of the year.

The report also points out that since September 2017, France’s wealth tax applies to real estate only, as opposed to all asset classes, and with record low interest rates on offer, many buyers are opting to take out finance to reduce their tax liability. A 70% loan-to-value mortgage is not unusual with rates around 2%, currently attainable.

When it comes to where people are buying, accessibility is a prerequisite for most buyers. The report says that the Eurostar line to Avignon proved a game changer when it opened in 2017, putting Provence within a 6.5 hour train ride of London St Pancras.

New large-scale infrastructure projects in the form of the Grand Paris Project, the upgrading of Marseille Airport as well as the planned construction of several new high speed train lines may also influence demand and future market performance.