Property investment in France
French property has long been popular with international investors. Whether you’re looking to build on an existing property portfolio, buy your first overseas property or let out a future holiday home, there are a few things to consider in advance.
Market trends
If you’re unsure where to start in terms of locations, it can be useful to read the latest market reports. These are frequently published by Notaires.fr, the official site for notaires in France, a public official who acts of the behalf of the state during the French property buying process.
These reports include annual and quarterly price movements (on average) by region or city. Post-Covid-19, trends indicate a shift towards suburbs and medium-sized cities, with small apartments in city centres gaining popularity among investors.
Real estate purchasing power is predicted to gain 8% in 2024 should interest rates stabilize. This comes after losing 15% over the last two years[i], suggesting that now is a great time to invest in French property while prices remain at a reduced rate.
Property types
If you’re looking to rent out your investment property in France, there are several property types particularly popular with renters:
Apartments: In major urban centres like Paris, Lyon, or Marseille, apartments dominate the housing scene. These are commonly referred to as “appartements” and are ideal for city living.
Houses: If you venture outside bustling cities, houses (maisons) become more prevalent. Maisons come in three varieties: detached, semi-detached and terraced.[ii]
Student residences: For students, purpose-built student accommodations are available near universities and colleges.
Short-term rentals: Tourists and expats often opt for short-term rentals, especially in popular tourist destinations. (Please see restrictions below)
Short-term let restrictions
Please note, there are various restrictions on short-term rentals in France, especially in cities and tourist hotspots. Paris, for example, cracked down on unregistered short-term rental properties in 2021. All hosts of short-term lets in Paris must now have a registration number for listings.
Some southern cities like Montpellier have limited second-home rentals to one per household to prevent excessive short-term rentals and regulate the market.
If you’re unsure, please check local restrictions or consult a French property lawyer.
Legal considerations
Investors in French property should be aware of various taxes they may be liable for.
Non-resident income tax (Impôt sur le Revenu des Non-Résidents)
If you’re a non-resident investor, you will be subject to French income tax on rental income earned from your property. The tax rate varies based on your income and can range from 20% to 45%.
It’s essential you declare your rental income annually and comply with French tax regulations. You do this by filing a Déclaration des Revenus annually. Returns are typically filed in April/May (deadlines vary depending on the department) of the following year. Investors should deduct any eligible costs (maintenance, repairs, property management fees) from their rental income before calculating taxes.
For accurate reporting, consult with a tax specialist.
Potential wealth tax (IFI)
Historically, France had a wealth tax (ISF) that applied to high-net-worth individuals. However, as of 2018, it has been replaced by the Real Estate Wealth Tax (IFI) that specifically targets real estate assets.
The IFI applies to properties with a net taxable value exceeding €1.3 million. The tax rate starts at 0.5% and increases progressively.
Société Civile Immobiliere (SCI)
An SCI is a legal entity used for property ownership and management. It offers several benefits including asset protection, tax efficiency and estate planning. Investors should note that forming an SCI involves administrative costs and ongoing obligations, so it’s advisable to seek legal advice before setting one up or chat to a tax specialist for guidance.
Buying costs
When buying a property in France, there are various mandatory fees that you may incur as buyer. These will always include notaires’ fees (typically 7-8% of the property price) and may also include estate agent fees (although these are usually included in the purchase price), legal fees, and survey fees.
Best regions for investors in France
Paris
The capital city is attractive for its cultural, artistic, and business significance. It’s a strong market for short-term rentals to tourists and students, with a gross rental yield of about 3.6%. The effect of the 2024 Olympic Games on property values will be interesting.
Cote d’Azur
Known for its Mediterranean climate and luxury properties, it’s popular for personal accommodation and rental investments. The region has a high demand with limited supply, keeping prices consistently high.
French Alps
Resort properties in areas like Courchevel and Chamonix are sought after for rental during the high tourist seasons of winter and summer. The region’s popularity is increasing due to rural tourism.
H2 Rental yields in France
- Bordeaux: Averages 4.34%
- Lyon: Averages 4.22%
- Marseille: Averages 4.94%
- Montpellier: Averages 4.94%
- Nice: Averages 4.39%
- Paris: Ranges from 3.6% to 7.5% depending on property type and location
- Toulouse: Ranges from 3.35% to 5.35%
[i] https://www.fnaim.fr/4324-conjoncture-et-politique-du-logement-le-logement-pris-en-flagrant-defi.htm