Credit Crunch - Invest in France?

The Strong Euro and the ‘Credit Crunch’ – Is France still a good investment?

The rising Euro and the ‘credit crunch’ are doubtless making for harder property buying conditions in France. However there are still many benefits and one of the most crucial is that France is still a very stable market and looks to continue in this vein. There is more competition from emerging markets outside the eurozone, these may seem appealing given the current strong Euro they do however offer a higher risk investment.

The French property market has so far not been affected by the so called ‘global economic crises’ by which the reality of that term is UK and US markets and the ‘credit crunch’. According to the Halifax UK house prices were down last month by 2.5% however it is expected that house prices in France will rise by at least 3% this year. The mortgage lenders in the UK are reigning in their lending however in France mortgage lending increased by 3% year-on-year in the last three months of 2007.

President Sarkozy is also offering tax breaks such as bringing in tax reforms including incentives such as being able to offset mortgage interest payments against income tax and lower inheritance tax. There are other tax breaks to assist the French rental property market. The French leaseback scheme was set up to assist in France’s tourist industry. Often these properties are new-build which can appeal to Brits who do not have the time or inclination to renovate a property. If you would like more information on this scheme please click here for our recent article. If you are buying a French property to rent in France it really is very important you do your homework, rental demand must be high whether it be from local or tourists. You need to work out how many weeks a year you would need to rent it out and at what cost, and really look at whether there is a realistic demand in the area you are buying.

If you can afford to buy in France it is still a stable place to invest your money, analysts have said that Europe is still at less risk from a property crash than Britain. Generally European banks have not overstretched themselves by entering in to the kind of lending that the UK and US banks have in the past few years and this has helped keep the market more stable. France also has other advantages over the other old favourite Spain where oversupply has become a huge issue. The strong Euro doubtless causes a problem but if you are buying this does not come without an advantage. You might be able to negotiate a better price with a British Vendor as they are already reaping the benefit of the strong Euro against the pound.

France also still has relatively low prices, however with housing shortages in areas such as Paris and France’s popularity amongst holiday home buyers, not only from the UK but Germany and Holland the French property market is still playing catch up with other European markets. You can still expect returns on your investment within the next ten years according to property experts. Despite the issue of the current strong Euro and the so called ‘credit crunch’, it would appear France is still a good investment. In a time of instability the French property markets offers a good port in a storm. As always it’s important to take independent financial advice.