What’s not to love about France? It is highly accessible from the UK, it is a large and geographically diverse and exciting country, its cuisine and wine are among the finest in the world, the French people are very cultured, the nation is beautiful and property prices in much of France are still incredibly affordable.
So, if you hold a dream of one day living in France or having a holiday home there then you are far from alone. You may have already looked at property prices and the types of home you can get for your budget as part of the ongoing fuelling of your fantasy, but have you asked yourself ‘how much will it cost me to buy property in France?’ yet? Are you aware of all the fees, taxes, commissions and hidden financial commitments you will have to make? This article covers the most salient financial points for you…
The first cost you may encounter is an estate agent’s fee – quite often these fees are met solely by the vendor but occasionally there is a liability to be met by the buyer as well. Estate agents can charge anything from between 4 and 12% of a property’s selling price and who pays what and how much is all laid out in the mandat or mandate which is basically a letter of permission to sell given to the agent by the vendor.
If you come across a property you are particularly interested in, ask the agent about their fees before you make an offer so that you can factor in anything you have to pay to them in addition to the selling price when you present your offer price.
If you need a mortgage to buy property in France you usually have to pay around about a 1% arrangement fee depending on the lender you favour, and then you need to pay 1 or 2% for registering the lender’s first charge against the property…what this means is that the lender gets the property if you default basically, and for signing over that right you have to pay out 1 or 2%! Oh well…
Next up are the legal fees…standard is the payment of the notary’s fees and for that you should allow an additional 1 or 2%. If you decide to bring in your own lawyer in addition to the notary and a surveyor as well (highly advisable especially if you’re buying an older home) then you should get quotations of their all inclusive fees up front and you can budget again for an addition 1 – 2% to cover all eventualities for each.
If you’re buying a new home you have to pay a hideous 19.6% VAT (unless you’re buying under the French Leaseback Scheme) and if you’re buying a property over five years old you have to pay stamp duty of 4.8%.
Ongoing ownership of property in France incurs a variety of council type taxes such as the land tax, occupancy tax and garbage tax. Land tax is called taxe fonciére and this is calculated depending on what the council determine is the theoretical, likely rentable value of your home. This amount is calculated on the 1st of January every year and is payable by about October with penalties for late payment. Occupancy tax is called taxe d’habitation and is payable by whoever is resident in your home on the 1st of January in a given year, so if you rent it out then your tenants pay it, but if it is your holiday home and you only occasionally use it you still have to pay this tax. If a property is actually uninhabitable, has no water or electric for example, and you’re in the process of renovating it you can sometimes get an exemption and pensioners can sometimes get a reduction on the amount they pay.
If you come to the point where you want to sell your home in France and it is your principal residence, as long as you reinvest any profits made into another property you will not have to pay capital gains tax. If on the other hand your home is a second or a holiday home or even a commercial type property that you rent out and/or somehow generate an income from, you may be liable to pay tax on any gain you make from the resale of it. The amount you could be liable for is complicated to calculate as it can also be in the UK and so you should actually take professional advice on this point.
One final tip that we’d like to pass on is that the laws of succession in France are extremely different to those in the UK and it is imperative that you take advice about creating a compliant will even before you undertake to buy a property.
