French leaseback demand to soar

Tuesday, July 06, 2010

French leaseback demand to soar

Demand for French leaseback properties is expected to increase dramatically over the next few,according to Athena Mortgages, following last week's announcement that 100 per cent loan-to-value mortgages are being made available.

Mortgages are now available in France on a repayment basis, from 2.6 per cent, and an interest-onlybasis from 3 per cent. Some mortgage lenders are now offering additional finance to cover the cost of stamp duty and taxes.

Athena reports that interest in French leaseback property has been strong over the first six months of the year, with many developments selling out completely.

John Busby, director, at Athena Mortgages said: “This is fantastic news for investors looking to buy a French leaseback through reputable developers. Not only are interest rates at historic lows and likely to remain so for some time, this higher level of loan to value means there is very little money to transfer to France to complete the purchase. With the pound now at a 19-month high against the Euro and set to strengthen further, conditions have never been better.”

The sale-and-leaseback (propriete allege) model was first introduced in the early 1980's by the French government, at a time when the country's construction industry required a much needed boost. The initial aim of the scheme was not only to create new jobs, but also to increase the supply of holiday homes and consequently improve tourism.

The leaseback scheme is particularly attractive to anyone seeking a low-risk, hands-off, long-term form of investment, because it presents investors with the opportunity to purchase property in France and then lease it back to a management company for a typical term of 9-11 years, with most leases renewable beyond the initial fixed-term agreement.

During the leaseback period, the management company is responsible for letting the property, furnishing, maintenance and paying all bills. Furthermore, most leaseback properties qualify for a 19.6% VAT rebate from the French government, under the 'residence de tourisme' scheme, while there are other possible tax advantages.

To read our guide to buying a property in France, click here

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A Place In The Sun