Wednesday, 28 September 2011

A tale of Notaires

We have been doing this job now for almost 10 years, so we think we know what is what.
When it comes to the final Acte de Vente (completion), we are in the hands of the Notaire, and like all walks of life, some are good and some are, well, pretty poor !
Currently we are wrestling with one such individual, and their "army" of staff who position themselves between you and Maître. This case has been ticking along without any problems and was due to complete on 30th September.
Because of inheritance / succession problems, the clients wish to purchase via a S C I (property company), so that they can leave shares (the property) to who they wish, rather than having succession laws imposed upon them.
The Notaire is insistent that the S C I must be created a week or so ahead of the Acte de Vente, even though we have previously done this on the same day as completion. (They have known about everything required since mid-April, and it is now that they start raising objections).
Following several phone calls, they have finally backed down, and completion can now take place on the same day as the S C I is created. Good news, BUT, they now cannot make the 30th September as their diary is full !!
The Notaire is also going on a weeks holiday between 3-9th October, so the first appointment available is 12th October.
Needless to say, we have well and truly marked the card of this Notaire and won't be using them in a hurry.
Meanwhile, another sale has bumped along and hit a few problems along the way. This time the Notaire involved, (a different one), has been proactive and has overcome the problems, much to everyone's delight. There is light at the end of the tunnel....
Peter Elias

Sunday, 18 September 2011

New Capital Gains Tax rules - impact on some vendors

It is not yet widely appreciated, but there are significant changes planned for Capital Gains Tax rules for owners of a maison secondaire in France. Previously, after a 5 year qualifying period, owners were allowed a 10% reduction in their liability, for each complete year of ownership, until after 15 years the property was deemed to be free of tax. The 15 year rule has now been extended to 30 years with smaller allowances in place. The new rules apply to all sales concluded after 31st January 2012. If the property is owned by a SCI (property holding company), the rules have already changed, (effective from 25th August 2011). A summary of the rules is aavailable from us upon request. You may need to discuss the implications of the new rules with us. We envisage that some owners, especially those who have owned a 2nd home in France since prior to 2007 will have financial implications as a consequence of this legislation. Those who have owned for even longer periods may have believed that they were now outside the Frencg CGT calculations. There could be a significant opportunity for owners to sell prior to the 31/01/2012, which generally would require a sale to have been agreed, (and a compromis de vente signed), by 31/10/2011.
Peter Elias (Agent Commercial)

Wednesday, 7 September 2011

2nd homes news

French Ministers have got their knickers in a twist again over changes to treatment of 2nd homes. Followers of the Blog may recall the climb-down earlier this year when a new proposed tax on 2nd homes was abolished before it even became law. Now it looks likely that recently proposed changes to capital gains tax (CGT) on 2nd homes will be watered down to appease members of the ruling UMP party. Now, it is likely no CGT will be paid on properties held for more than 30 years, an extension of the current 15 years and a considerable change from the proposals which saw no advantage to holding a property long term. It is also proposed that the calculation of CGT will change, the finer details are still being thrashed out, probably based upon inflation over the period of ownership and with an increase in social charges. Currently capital gains made by private individuals on the sale of a property that is not their primary residence are subject to a withholding tax of 19% for EU citizens, to which is added the social security contributions (for French residents). The capital gain is broadly the difference between the original purchase price and the sale price, less any qualifying expenses. However, a reduction of 10% per year beyond the 5th year is aplied to the gain calculated. Thus, sales made after the 15th year of holding the property are fully exempt from CGT. This has encouraged owners to keep their property for 15 years to benefit from a CGT exemption. Prime Minister Fillon recommended removing the 10% reduction per year to tax gains actually realised on property, after neutralisation of inflation. The capital gain would be calculated based on purchase price plus inflation observed since the acquisition date. It is likely that the new regime will apply to any sales contracts signed after 24th August 2011. Peter Elias

Sunday, 4 September 2011

The property market 2011

No doubt, since 2007, the property market has been tough, both here in France and globally. But having survived during these difficult years, I have become convinced that the only reason that a house does not sell, even in troubled times is it’s price.
I have lost count now of the number of owners who now admit that my original estimation was in the right ball park, and that their « valuation », which is normally based on original cost + cost of all works carried out + x%, was shall we say optimistic.
Vendors often want to build in a « margin » for negotiation as well, and this of course inflates their house price even further.
Beware ! When you are selling a property you will come across 3 types of agency, the first, stroking your ego by agreeing a high valuation for your property, in order to ensure that they get the mandat. The second, who will look to sell your property quickly, and give a low valuation, and perhaps try to tie you into an exclusive mandat deal, and the third who will try to give you a realistic valuation of what you can expect to get in the current market.
Don’t forget that if you bought between 2000 and early 2007, you purchased in the boom years, when Brit buyers were following the trails of « A Place in the Sun » and houses were selling, literally, like hot cakes. Since then, the market has changed dramatically, UK buyers are largely absent, and the young French buyers don’t want to live in rural France, they want to live in the towns and cities.
We find that the most interest that we have for a property is during it’s first 6-8 weeks on the market, known in marketing terms as the Product Life Cycle (PLC). It is crucial to get the pricing right during this early phase of the marketing, as this represents the best opportunity to sell the property. After the 6-8 week period, the property has reached « maturity » in this cycle, through it’s exposure on the internet and enquiries received. After that, it is a slow, steady decline, until some new impetus is injected, (in the form of a price reduction), when the cycle starts again on a smaller scale.
Therefore, you us to give you an accurate guide to pricing your property from the outset, and please don’t be tempted to try to factor in what the house « owes » you, or that margin for negotiation. At the end of the day the only real driving force for a sale in price.
A house in poor condition, or bad location will sell if the price is right. A beautiful house, in a great location won’t sell if it is above the market value in a difficult market. Peter Elias