Property in France: Selling
One of the main concerns for purchasers is whether they are paying the right price for the house or apartment they have finally selected in France. While for their part, owners and sellers worry about the ‘value’ of their property – is it going up or down and how much can we expect to get if we sell? Valuing a property is something of a black art, a mixture of technique and intuition; and in this article I explain how the professionals go about the valuation of your property.
The notion of value has, of course, different meanings for different people and property valuations may be required for various reasons – in order to arrive at a sale price, for purposes of probate and inheritance, to calculate tax liabilities or to assess the rental potential of an investment. In any market – such as the market for property – the value of something sold may not be reflected in its actual price. The property market may be temporarily saturated, hence prices will fall; owners may be desperate to sell and prepared to accept a price lower than the property’s perceived value. Very occasionally, potential buyers are prepared for personal reasons to pay more than the notional value of a property, although gazumping does not occur in France.
As a result, it is not easy to calculate the true value of a property. Property is also unique in that it is immovable. How often have we seen a desirable house or apartment we would love to buy – if only it was located somewhere else! The ‘stock’ of available properties is also relatively fixed compared to other products that can be manufactured or replaced quickly, whereas construction takes time and may be ahead of (creating a surplus) or behind (creating a shortage) the needs of the market. It is also difficult to arrive at a replacement value of property, as you would when negotiating with your insurers about your car or a firedamaged three-piece suite, for example.
The market value, known in French as the valeur vénale, is defined by the IFEI (the French professional valuers association) as the price at which a property could reasonably be expected to change hands in a stable market and given the presence of a willing seller and buyer.
However, even in these ideal conditions, similar properties will vary in value, and it is here that the professional will use his expertise to distinguish one property from another, and arrive at a higher or lower valuation in each case. Which is why, sadly, vendors cannot rely on the fact that “the house opposite recently sold for X”. Although comparisons with local market prices play some part, other factors are taken into consideration by the professional valuer and these include location, physical condition of the property, economic factors, the legal position and taxes.
Location, location, location...
As a general rule, a property in a city centre will sell for a higher price than a similar property in a remote country location. While some of us hanker for a rural retreat, the most frequent requirements listed by potential buyers are for reasonable proximity to a town or village, and easy access to local services such as shops, post office, bar or café, doctor, school and public transport. Areas of France within one hour of an international airport served by low-cost carriers are also generally favoured over remoter locations.
The French tend to commute less than the British, although this is changing in the greater Paris region due to high property prices in the city. So access to public transport and/or reasonable travel-to-work distances tend to push up property values. In the south, many employees travel to and from work twice a day, to profit from the long lunch hour plus siesta, so properties within 20 minutes’ drive of the town centre again command a premium.
Other desirable locations include those with a pleasant view, the second most sought after requirement. This can include countryside, mountains, lakes and the Atlantic or Mediterranean coast. Clearly a property located close to a busy main road, railway line, a shopping centre, factory or public services, all likely to cause a nuisance, is at a disadvantage. Many areas are also designated as liable to flooding or subsidence. Property values are also affected by their more immediate neighbourhood. Some areas are more chic than others, or may have a reputation for noise, crime, vandalism, dilapidated property, abandoned cars, lack of public spaces and so on. Property density is another factor in arriving at a valuation, and can affect the size of gardens or grounds, along with the age and condition of the property itself and its adjoining buildings.
Physical condition includes the site itself (flat or sloping, type of subsoil, liability to subsidence or flooding, open or planted, access, parking etc), as well as the actual fabric of the building. The physical condition will depend on the building’s age, the quality of materials used, how well or not it has been maintained, and considerations such as the state of the exterior (outside walls, roof, foundations, drains, paintwork) and interior – with particular attention paid to roof beams, supporting walls, windows, interior partitions; stairways, doors, floors; gas, electric and water installations; heating and hot water systems and the quality and condition of fitted elements. Good quality kitchens and bathrooms invariably add value. The proportion, layout, size and number of rooms will also affect value for better or worse.
The obligatory technical surveys that are commissioned by a vendor will also check for the presence of lead (in pipes and old paintwork) or asbestos, which is difficult and costly to remove. Older buildings are invariably less well heat- and sound-insulated and may not have adequate roof insulation or double-glazing. Terraces and balconies receive careful examination, along with attics and basement areas, to check for common problems such as subsidence, infestation and damp, all of which affect a property’s value.
Do-it-yourself alterations, even if well done, may detract from the value of the property, as much as hasty renovations (‘papering over the cracks’, sometimes literally). Work that has been undertaken by qualified artisans and is subject to guarantees, and for which documentation is available, will add value, along with the essential evidence that planning permission was sought and granted.
Share prices
The value of properties that are bought as part of a coownership complex will have their value affected by the state of the common parts, and these have to be considered in the same way as an independent dwelling. Critical factors can include the need for external or internal painting, the condition of the lifts and the presence or absence of a secure entry system. Co-ownership rules may detract from a property’s value, for example issues like pets, external TV aerials, sub-letting to tenants, or glazing-in open balconies.
Economic factors include external considerations such as the general prosperity of the surrounding area, including the level of employment and overall quality of life; and direct factors such as the amount of local property taxes payable. Properties that are within coowned buildings may also be subject to high monthly charges, for example where there are extensive grounds, a swimming pool/tennis courts and/or a resident concierge, all of which have to be paid for. Expensive major works that have been voted for by the syndicate of coowners again may detract from the property’s current sales value (but will enhance it later when completed).
The principal legal aspects that may affect a property’s value are whether it is freehold or leasehold, vacant or tenanted, or subject to any easements, as well as any litigation regarding access, zoning, boundaries, planning permission or change of use.
For potential vendors in particular, the property’s tax situation will be a final consideration in arriving at a price value. Second homes are subject to added-value taxes during their first 15 years of ownership, while there are special VAT regulations relating to new-builds and some conversions, all of which will have to be taken into account, along with possible inheritance taxes, in attempting to arrive at an estimate of the proceeds from an eventual sale.
Valuing for rental
Although the same rules will apply, valuing a property for its rental potential adds a further dimension as investors, or their advisors, need to have a clear idea of the level of return that can be reasonably expected from a property. My advice here is to proceed with extreme caution. Recent reports indicate that the buy-to-let boom under various tax saving schemes (such as the Loi Robien) is now over, with some 50 French towns, including my neighbouring Perpignan, reporting a surplus of unlet properties.
After showing initial enthusiasm, banks are now becoming more cautious about lending. Many owners, who relied on the developers’ overenthusiastic predictions of future rental income, have been left with overpriced properties that are unlettable, and in some cases unsaleable (they were overpriced to start with). Among the reasons cited are unsuitable location (areas where building land was cheap but unattractive), poor quality construction and finishing, and the high rentals demanded by owners needing to cover the cost of their investment. Valuing for investment accordingly demands expert knowledge of local market conditions to arrive at a fair assessment of rental potential. Independent advice and a personal visit to the proposed development are strongly recommended.
Preparing for sale
Finally, and not strictly within the remit of the professional surveyor or valuer, a wellpresented property (to use estate agents’ jargon) will generally sell more rapidly. The concept of ‘house doctoring’ has not yet caught on widely in France and properties in agent’s windows euphemistically marked ‘vendu dans son jus’ generally mean you should prepare for the worst. Okay if you like the lived-in look, but the majority of buyers are known to prefer properties that are clean, tidy, free of clutter and above all depersonalised. A current TV series on Channel Six has been trying to introduce the French to the secrets of housedoctoring. Already, it has demonstrated some impressive results for potentially interesting properties that had languished on the market for six months or more, for want of little more than a facelift.
Among the most common situations encountered were unfinished DIY attempts, poor decoration, bare wires, missing light fittings, exposed pipes, rotting woodwork, dog smells, overcrowding, dirty kitchens and bathrooms, and untidy gardens. In each case, the presenter has shown owners how to remedy these defects, usually for less than one or two per cent of the asking price. All the properties featured in the programmes were sold or under offer within days of the improvements being carried out, often in the face of stiff competition.
There are real lessons here for anyone needing to enhance the potential sales value of their French property. Pricing a property for sale needs to be handled professionally, ideally by a qualified expert immobilier. I hear horror stories of agencies taking properties onto their books without even visiting them or simply going along with the owners’ suggestion of how much they want from the sale, net of commission!
This is a disservice to clients and results in dissatisfaction both to owners, when the property fails to sell as well as to potential buyers’ frustrated by optimistic and occasionally downright reckless over-pricing. When I worked as a negotiator, I sometimes gently suggested to owners that they clean up their house before putting it on the market, but was told by my bosses not to upset the clients! So British owners, more accustomed to the idea of good presentation, should stand to gain in what is still an overcrowded market.
Peter-Danton de Rouffignac (MA LLM) is a property advisor and consultant and director of francemediterraneanproperty.com