Buying property in France

How can we help you buy a property abroad? 

As either a regular holiday destination or a peaceful place to retire, France continues to hold significant appeal for Brits. If you’re buying a property in France, it’s worth compiling a complete budget which covers all the costs.

To do this, you may need to get to know the process required to buy a house in France. There are specific rules relating to holiday homes, investment property and relocating to France with a residence permit, and these come with associated costs.

France has a lot to offer, from rural retreats in wine country to cultural and sporting centres. Holiday homes in France are found across the country; some are drawn to the temperate clime and glamour of the South, others to the slopes of Chamonix or Val-d'Isère or the cultural hubs of major cities.

Many seek to retire and emigrate to France for its healthy, delicious food, the slower pace of life, and better weather - away from the long, grey British winters.

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Scout out the market

A scouting trip is not only an invaluable tool when considering purchasing a property in France, but it's fun, too. It's your opportunity to explore the country's diverse regions, research property prices, and find the perfect fit for your needs and preferences - from the bustling streets of Paris to wine country retreats or the French Riviera.

Before you go, there are some essential things to consider to help make your trip as productive as possible.

Find a Real Estate Agent

French estate agents are often booked up in advance, so it’s worth arranging some appointments before you travel. When you’re working out how much time you need for a viewing trip, ensure that you’ve left time not only for travelling between locations but also for repeat viewings and a chance to get a feel for the location.

An estate agent will also be able to give you lots of useful information on both the local area and historic property sales and house prices.

Think about your finances

It helps to look at your finances in advance because you may fall in love with a property on your first exploration trip. It’s up to you how far along in your plan you want to be before you visit, but at least having an idea of whether you intend to take out a mortgage, pay in cash, or both for property purchases is a helpful decision to have made ahead of time.

Get familiar with the Euro

Look at what's changed over the last 12 months and get comfortable with the idea of spending in the currency. Keep an eye on fluctuations and get an idea of what you think is a good and bad rate and how they could impact your budget.

What would the difference be if you exchanged when the rate is in your favour vs. when it isn't? Once you’re familiar with the exchange rate, find your ‘comfortable range’ by choosing an aspirational rate and the rate you can’t afford to fall below. This will help you to define a good rate for you and feel more confident when you go to exchange your funds.

 

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Understanding the costs

Holiday homes in France may be an excellent investment and provide a place to retreat from your busy day-to-day life, but there are costs involved beyond the purchase price and maintenance of the property. So, if you’re planning a property purchase in France, ensure you've included everything in your budget.

As with buying property in the UK, there are plenty of associated costs to think about. These range from solicitor and estate agent fees to tax implications, visas, currency costs, and legal and property inspection fees. All of this involves a lot of money crossing borders, which in itself can mount up.

The key is looking beyond the headline price of the property you’re buying and factoring in the other costs that will impact the final property price you'll be working with in the UK.

 

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Navigating currency exchange

Exchange rates are constantly fluctuating. This means that when you decide to buy a property abroad, the real-term cost of your purchase can change with the rates. Imagine getting to the point of buying your dream property, and the price is different from when you made the offer. That's the reality of the foreign exchange market – small changes make big differences when you exchange a large amount of money.

That's why it is essential to seek guidance from a foreign exchange specialist when sending your money to France. Understanding the services available to you, such as the ability to target an exchange rate, will help you make smarter international payments.

The impact of exchange rates

Exchange rates play a vital role in determining your budget, and that’s why it’s so important to do your homework before you go.

For instance, in 2023, the GBP/EUR rate fluctuated between 1.1775 and 1.1135. To put this in perspective, the difference in price at these rates on a €500,000 property would be more than £24,000. Last year, volatility was relatively low; in 2022, the difference between the highest and lowest rates would have made a difference of nearly £51,000.

A currency exchange specialist like Moneycorp can offer you competitive rates and efficient service and give you access to an exchange specialist who can guide you through the process and explain the tools available for overseas payments.

Transfer fees

High street banks charge up to £30 for each overseas transaction and usually between £2 and £7.50 to receive funds. The fees are often used to cover the bank’s international transaction processing cost. Some are more hidden than others, so as a consumer, you should always be aware of the total price you are agreeing to pay.

Variance in the market

The more significant factor is the exchange rate variance between different providers. A change of even a fraction of a percentage point in the exchange rate can make a big difference when considering the large sums involved in a property deposit and purchase. The variance between GBP/EUR exchange rates across the market can be more than 4%* - amounting to a difference of £4,000 for every £100,000 you exchange.

Protecting yourself from risk

Normally, completing a residential property purchase in France takes 2-3 months from when you pay the deposit. On the completion date, French law means the signature of the Title Deeds must take place in front of a Notaire in France. To make sure there are no delays, you'll need to wire the final funds and any outstanding fees are wired directly to your Notaire's account before the day of completion.

Because of the time lag between paying your deposit and until your final payment is due, this time can be unsettling for buyers because exchange rates can fluctuate significantly. Fortunately, there are ways you can protect yourself from risk when purchasing property, by using currency tools.

A currency specialist will assess your situation, timeframe and budget to help plan any payments and give you complete transparency over the market and how it is behaving.

You can also take advantage of services like regular updates on available rates to help you plan your budget. Having the account already in place also means that the moment you find your dream property, you’ll be well placed to act - but don’t worry, there is no cost or obligation to use the account if you don’t find a suitable property.

You could even fix the rate beforehand if the rate is favourable using a tool called a forward contract*. This allows you to avoid any fluctuations affecting the final price in sterling. Alternatively, you can track or even target a specific rate to help you maximise your money in France.

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Getting a mortgage

When it comes to buying property in France, UK lenders have proven to be unwilling to lend money for the purchase of a French property due to concerns about obtaining security against the loan. You may be able to secure the loan against other assets, but it’s worth also looking into getting a mortgage in France.

Even if you can get a mortgage in the UK, it may be worth considering taking out a mortgage in France because, historically, the rates have been more favourable than those in the UK.

French mortgages can be fixed or variable rates; fixed rates are the more popular option for people buying a holiday home in France, but a third option is a variable mortgage with capped monthly payments. These flexible mortgages, or prêt modulable, provide a payment cap, which means that the mortgage duration will increase if interest rates push the price of monthly payments significantly higher. The main challenge if you’re looking to buy a house in France is that most French mortgages require a sales contract, so it becomes a ‘chicken and egg’ between signing the contract and taking out a mortgage.

To get around this, you will need to request a mortgage in principle, which should help speed up negotiations. If you’re keen to gain approval, it’s worth signing up for a French bank account early in the process because you can use the funds in that account as proof that you can afford the deposit and ongoing costs.

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Local taxes and fees

Notaries’ fees in France include the French equivalent of stamp duty to purchase property. The overall rate is charged on a sliding scale related to the cost of the property and comes in at 7-8%. This may seem high, but the price includes land registry and disbursements, as well as 5.8% for stamp duty. You may also be liable for the estate agent’s commission.

The phrase to look out for is ‘frais d’agence inclus’, or FAI, which means fees are included, but if this isn’t the case, find out exactly what that fee will be before you sign on the dotted line.

There are two types of council tax - ‘taxe foncière’ and ‘taxe d’habitation’. The first is a land tax, which the landowner is obliged to pay. The other is a residence tax and includes the French equivalent of a TV license.

If you’re buying a holiday home in France or looking to rent it out for all or part of the year, it’s worth checking what you’re liable to pay. With all these costs, it may be worth working with a currency specialist to get great rates and low fees on your currency transfers from GBP to EUR.

Owning a property in France is a dream for many, but navigating the intricate process requires careful consideration and expert guidance. By understanding the costs, exploring mortgage options, and collaborating with currency specialists, you can make the sale process of buying a house in France smoother and more rewarding.

*Data taken on 12/01/23 and sourced from Bloomberg and RBS.

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