FRANCEcOUNTRY OVERVIEW

nWorld’s most visited country

nSarkozy’s election

encouraging investment

n Fourth highest property price

growth in Europe – 78%

increase in five years

nStrategic heart of Europe

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2 OVERVIEW < FRANcE

ExcEpTIONAl pROpERTY pRIcE gROWTh France has had the fourth highest property price growth in Europe, rising 78% between 2001 and 20061 . Only Estonia, Spain and the UK have seen higher growth. The effect of the Sarkozy government’s economic plans should help maintain strong property growth in the years to come.

ThE SARkOzY EFFEcTThe election of Nicolas Sarkozy as president in May 2007 opened a new era in French politics. A keen driver of economic liberal policies, he is looking to reform the French economy through a programme of lower taxation, government reform and privatisation policies. One of his key plans is to create a homeowners revolution with tax breaks to create ‘a nation of property owners’ . This support for property ownership by the government should push demand in the market and have a positive effect on property price growth.

hIgh INFRASTRUcTURE INVESTmENTAccording to Business Monitor International2, France has the highest rate of residential construction in Europe. It has outlined plans to invest €20bn under a long-term programme to modernise transport infrastructure. This includes the €9.9bn Lyons to Turin high-speed rail project and the €3.2bn Seine-Nord Europe canal. Europe’s fastest train – the TGV – will also be extending its network to Barcelona (due to open in 2009). Such infrastructure developments are also likely to boost the property market.

ThE WORld’S mOST VISITEd cOUNTRYWith over 75 million people visiting every year3 (more that the country’s entire population), France is, without doubt, the world’s most popular tourist destination. Few countries can combine the magnificence of Paris with the ever-fashionable Côte d’Azur and beauty of Provence. Home to world-famous art collections, 10 wine regions and 350 cheeses, it’s no surprise that it is a must-see destination for the international tourist.

TAx AdVANTAgES FOR NEW pROpERTYNew developments in France may gain exemption from local property tax on for two years – an incentive to buying property here. Add to this a decreasing level of capital gains tax if you hold for between six and 15 years. But big changes are expected with Sarkozy committed to reducing taxation by 4%4 , which should benefit investors in years to come.

Why invest in France?

Coastline of Nice

OVERVIEW < FRANcE 3

A glObAl EcONOmY…France is the seventh largest economy in the world5, and the third largest in Europe after the UK and Germany. As a member of G8 group of leading industrialised nations, it has a significant influence on the world economic stage. In 2006, France was ranked third – behind the US and the UK – in levels of foreign direct investment, according to United Nations Conference on Trade and Development6. The country has enjoyed steady growth and the forecast economic liberalisation now makes it an attractive place for property investment.

…ANd A WORld pOlITIcAl plAYERIts economic stability is matched equally with a political one, which gives you another good reason to invest here. As a founding member of the European Union, France is one half of the key political partnership of the union, with Germany. It has significant world influence reflected through its status as a permanent member of the United Nations Security Council.

lARgE ExpATRIATE cOmmUNITYRecent research suggests that over 700,000 British people live in France7 , making it one of the largest British expat communities. Many live in the south in regions such as Provence and Languedoc, aspiring to a better quality of life. Their presence has a positive effect on the property market as demand for quality yet traditional-style property is high.

ExcEllENT lOcATIONFrance is in the heart of Europe and is easily connected with most of western Europe and the wider world. Airlines fly from all major cities in Europe, and a large and efficient rail network makes travel easy to, and throughout, the country. This makes it popular with the tourists and international business, which has a positive effect on property demand.

mAjOR EVENTS dESTINATIONFrom the famous Tour de France that pulls crowds from around the world to the Cannes Film Festival, France regularly hosts key international arts and sports events. In September 2007, the Rugby Union World Cup is coming to France, with games being held all over the country, from Paris and Lens in the north to Toulouse and Montpellier in the south. These events raise the profile of France’s different regions and can lead to extended or return tourist visits, increasing regional interest, desire for quality properties, suggesting both strong rental demand and healthy capital growth.

1. www.globalpropertyguide.com/graph.php?id=68&cid=eu&order=1&cat=182. www.businessmonitor.com/infra/france.html3. www.unwto.org/facts/eng/pdf/barometer/unwto_barom07_2_en_excerpt.pdfb4. news.bbc.co.uk/1/hi/world/europe/6357899.stm5. siteresources.worldbank.org/dATASTATISTIcS/Resources/gdp_ppp.pdf6. www.forbes.com/opinions/2007/07/09/favre-invest-france-oped_pf_0710favre.htmlpdf7. www.expatica.com/actual/article.asp?subchannel_id=22&story_id=39293.

City of Cannes at dusk

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4 OVERVIEW < FRANcE

FRANcE AT A glANcE

Population: 61,500,000 (2007 estimate)Area: 543,965 km²Climate: Temperate climate in north and north-west; Mediterranean climate in south Languages: French Government type: Semi-presidential unitary republicLocal time: GMT + 1 hourCapital: ParisCurrency: Euro

Main airports: Charles de Gaulle (Paris); Paris-Orly, Bordeaux, Lille, Marseille Provence, Nice, Nantes, Strasbourg, Toulouse-Blagnac.

British Airways and easyJet fly from London Gatwick to Toulouse with prices starting at around £65. Ryanair flies from London Stansted to Carcassonne and Perpignan, with fares starting a around £60. Approximate flight times are 1 hour 45 minutes from London.

Ryanair also flies from Dublin to Carcassone with an approximate flight time of 2 hours, with fares starting around £104.

Trains: Eurostar operates from Ashford, Kent and London (currently Waterloo with Kings Cross St Pancras link due to open November 2007). Destinations including Paris, Lille and Avignon. Journey time, London-Paris approx three hours. Prices vary considerably (expect to pay more at weekends, for example) and cheap promotional offers often available, but typical price for advance-purchase non-flexible return ticket is around £99.

Bordeaux

Paris

Avignon

Marseille

Nice

Lyon

Dijon

Nantes

Angers

Tours

Orleans

Reims

FRANcE

Le HavreAmiens

Rouen

Toulouse

Montpellier

Perpignan

France

River Seine in Paris

OVERVIEW < FRANcE 5

property market, as increased salaries generally drive up property prices. Lower inheritance tax would also encourage investors to buy into property for the long-term, with positive effects on market growth.

Increased confidence in the government to deliver its policies might well bring a new period of economic growth and stability. Sarkozy’s pro-business plans are opening up the French economy to global business, as well as encouraging an entrepreneurial streak in the local market. This could combine to increase the number of new businesses, employment and better salaries. People will want – and be able to afford – higher quality properties in the more desirable areas.

Business owners, swelled by increases in profits from increased productivity and tax reductions, would be looking for further investment opportunities and with property set to benefit. This could cause a significant increase in capital growth in the housing market.

There is no doubt that the election of Sarkozy has brought a new mood of optimism. In the first month alone, business confidence has risen according to Insee, the national statistics agency. With Sarkozy at the helm, France has the best opportunity in decades to realise its economic potential. For property investment, now is a perfect time to get in – before the market takes off.

The Sarkozy effect The election of Nicolas Sarkozy as president in May 2007, combined with the victory of his UMP party in the parliamentary elections a month later, marked a new era in French politics. His plans to rejuvenate the French economy with a strong dose of economic liberalism have brought a new confidence to the French and wider business world… and also to property investors.

His policies are set to spark the renewal of the French economy. These include: tax incentives to increase productivity by encouraging an extension of the 35-hour week; an overall drop in taxation of 4%; a shift away from income and inheritance tax towards consumption and environmental tax; a reduction to the civil service (which correctly accounts for 45% of government expenditure); and the privatisation of stakes in key French companies such as EDF, Renault and Air France1.

But one policy is particularly exciting for property investors. Sarkozy recently revealed plans to use tax incentives to increase the level of home ownership in France and create ‘a nation of property owners’2. France has lower property ownership culture than other European countries with only 57% owning property, compared with 70% in the UK.

It is clear that Sarkozy has a mandate for positive change, and this is exciting investors the world over.

So, what could be the effect on the property market? The tax incentives on property ownership are likely to have the most direct effect, encouraging people to invest in property. This should drive up demand, which will increase property prices.

Other income tax incentives will also support people to work longer and gain more income. This will have a positive effect on the

president Nicolas Sarkozy of France, elected may 2007

1. news.bbc.co.uk/1/hi/world/europe/6357899.stm news.independent.co.uk/business/comment/article2744877.ece2. www.guardian.co.uk/france/story/0,,2091815,00.html

The French Riviera

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6 OVERVIEW < FRANcE

Tax in France

As with all tax systems, rules in France are complex. We would suggest you contact a tax specialist to get advice about your specific investments.

However, here is a guide to what you can expect as a UK investor purchasing a property for investment purposes. Please note that with the new presidency, the taxation system is subject to change.

lOcAl pROpERTY TAx• This annual tax imposed on the owner, whether or not the property is actually occupied by them, or rented out.

• Like the British council tax, it is based on a notional rental value based on the condition, size and location of the property. It is suggested to allow around €1,000 a year for this tax1.

• There is also the taxe d’habitation which is imposed on the occupier of a property. Therefore, if you let the property on a regular basis, the tax is paid by the tenant.

• However, new buildings, additions to existing buildings and rural conversion may be granted full exemption from this tax for two years.

cApITAl gAINS TAx• This tax is payable on the sale of land or buildings, and is the difference between the sales price and the original purchase price2.

• A resident of France pays 27%, an EU resident pays 16%, non- EU residents pay 33.3%3.

INhERITANcE TAx• New legislation proposed by Sarkozy will end inheritance tax between couples, meaning that assets can be left to the living partner without being taxed4.

• The inheritance allowance of each child has also risen from €50,000 to €150,000, and the gifts allowance has also risen.

INcOmE TAx FROm RENTAlS

• In rentals, the net income received by a non-resident is subject to a minimum income tax rate of 25%5.

WEAlTh TAx• You only pay tax on assets that are in excess of €760,0006, your tax specialist will advise you on this.

VAlUE AddEd TAx• This tax is payable on all goods and services, and is currently 19.6%7.

Uk TAx SpEcIAlISTWith all these taxes, there are a number of exemptions and reductions, which a tax specialist can advise you on.

If you would like to speak with a UK accountant with regards to your tax position, you are of course free to choose who you like, although we use Drew Hazell at Tayler Bradshaw and find him highly knowledgeable. His number is 01799 525 407.

1. www.frenchentree.com/fe-property/displayArticle.asp?Id=6902. www.frenchentree.com/fe-legal/displayArticle.asp?Id=19083. www.frenchentree.com/fe-legal/displayArticle.asp?Id=189594. www.frenchentree.com/fe-legal/displayArticle.asp?Id=278315. http://www.globalpropertyguide.com/country.php?id=68&cid=eu&cat=46. http://property.timesonline.co.uk/tol/life_and_style/property/overseas/article1966321.ece7. www.investinfrance.org/France/doingbusiness/db_2006_taxation_en.pdf

Sunflower fields in Provence

OVERVIEW < FRANcE 7

1. www.frenchentree.com/fe-property/displayArticle.asp?Id=6902. www.frenchentree.com/fe-legal/displayArticle.asp?Id=19083. www.frenchentree.com/fe-legal/displayArticle.asp?Id=189594. www.frenchentree.com/fe-legal/displayArticle.asp?Id=278315. http://www.globalpropertyguide.com/country.php?id=68&cid=eu&cat=46. http://property.timesonline.co.uk/tol/life_and_style/property/overseas/article1966321.ece7. www.investinfrance.org/France/doingbusiness/db_2006_taxation_en.pdf

hOTSpOT OVERFlOWA hotspot overflow occurs when the demand for a place pushes prices up to excessive levels. This causes investors to look for similar property in a nearby area where prices are lower. As one of the most desirable places to live in the world, the south of France has a string of property hotspots along the Côte d’Azur. What you get with the Languedoc is a real taste of the south of France without paying the earth for it.

hIgh-SpEEd TRAIN lINkFrance is home to one of the world’s fastest trains – the TGV. Its network stretches across France and a new link is connecting Narbonne with Barcelona and Paris will open in 2009. With journey times slashed, the Languedoc region will be even more accessible to other parts of France and Europe. Not only does this mean those living in Languedoc can easily reach major international cities, but that those living there will consider Languedoc as a place to visit and even commute from. There is a simple rule in property: whenever new infrastructure is built, prices in property rises.

TOURISm cENTREThe Languedoc itself is a beautiful region of France, yet is well-connected with the rest of France. With three international airports at Perpignan, Carcassonne and Toulouse, it is served by budget airlines making it popular with the international tourist. It is home to beautiful cities and attractions, including Carcassonne with its medieval beauty, and the thriving market town of Narbonne. The Canal de Midi, a Unesco World Heritage Site, runs through the regions and attracts thousands of visitors every year. It was recently featured in the BBC series Rick Stein’s French Odyssey, raising its profile among the British. A popular tourist area will increase demand for quality property for rental.

Why invest in Languedoc?

1. www.ipsos.fr

Montpellier

Mende

Avignon

Alès

Nîmes

Béziers

Narbonne

Carcassonne

Perpignan

INWARd mIgRATIONFrench people are now realising the beauty of the region, and are looking to want to move here from the city. This story is stronger even than the enduring tourist market – it is not just foreigners, but French people themselves who are beginning to eye this beautiful corner of the country. According to a report by IPSOS1 , 34% of French city-dwellers would like to move to the countryside within the next five years. In some departments of the region, the population is already increasing by 1.3% per annum – twice the national average. This cultural trend means that demand for property in areas like Languedoc will increase, with high potential for capital growth.

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8 OVERVIEW < FRANcE

FAQ for French property purchases

dO I NEEd A VISA TO ENTER FRANcE?No. You do not need a visa to enter France if you are an EU passport holder.

WhAT NATIONAlITIES cAN bUY IN FRANcE?Any nationality, resident or overseas, can purchase property in France.

WhAT dOcUmENTATION WIll I NEEd?A valid passport and birth certificate. Please note that more documentation is required for a mortgage application.

WhAT mORTgAgES ARE AVAIlAblE?The following mortgage terms are currently available:• Loan amount up to 80% maximum loan-to-value• Term – up to 25 years• Maximum age – 75 years• Affordability – status-based (proof of income will be required)• Currency – euros.

ARE ThERE AddITIONAl cOSTS WITh RESpEcT TO mY pURchASE pRIcE?Yes. There will be a notaire fee of 2.5% of the purchase price, and mortgage setup and registration fees of 2% of the purchase price, dependant on the type of mortgage that you have secured.

dO I hAVE TO bE IN FRANcE TO cOmplETE ThE TRANSAcTION?No, Ready2invest will help arrange a power of attorney to be granted to a third party lawyer enabling them to act on your behalf. This should be in the French form, and signed in front of a notaire.

4 dO I NEEd TO FINd A NOTAIRE?No, Ready2invest carry our extensive due diligence on a number of legal firms in each country. We will recommend a suitably experienced English-speaking lawyer for you to use. This lawyer will act on your behalf and will be independent of both Ready2invest and the developer.

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Bridge over the River Seine in the heart of Paris

The Louvre