With the 2010 ski season upon us, seasoned skiers and astute property investors alike will be considering alpine property investment in France. Property in French ski resorts has been a booming market for many years and prices are constantly on the rise. The investment should offer hassle free snow holidays with good guaranteed rental, along with longer term equity gains. However, the last couple of years have seen a lack of snow, poor rental returns in certain resorts and specific problems with leaseback and buy to let investments. All of these naturally make the potential investor nervous.
Why France?
France has always been a hotspot for Brits investing in overseas property, and its popularity is second only to Spain.The French property market is seen as conservative, safe and steady. Its proximity to the UK has always made it an accessible choice, and the advent of budget airline flights to Chambery, Lyon, Grenoble and many other local airports along with the now even faster Eurostar train journey from London to Paris means that Britons can pop across the channel faster and more cheaply than ever before. New political developments in France should help sustain and hopefully even increase the capital growth of French property, and encourage even more Brits to invest. French President Nicolas Sarkozy’s reform plans should impact positively on property development and lead to a much more property owner orientated population.
Why French Ski Resorts?
Think of skiing or snowboarding in Europe, and thenames Meribel, Courchevel, Chamonix Mont-Blanc and Val d’Isere glide easily into the mind. While Borovets (Bulgaria), Grainau (Germany), Bormio (Italy), Kitzbühel (Austria) are all decent ski fields, they seem to lack the same veneer. The French ski fields are renowned as some of the best in the world, and have the world’s longest combined on-piste mileage of nearly 5,000 miles.
Take a look at a map of France and yes, it is a large country, so don’t be deceived by scale. France’s ski resorts are spread over seven different mountain ranges, the most famous of which is undoubtedly the Alps. However, many resorts areless than 2 hours away from the South of France (Nice / St Tropez) and the South West (Biarritz / Bordeaux). So, when factoring in rental incomes for an investment it could be a good idea to contemplate the summer activities of the coast.
However, while a combination of ski and sand sounds appealing, many experts would recommend buying above 1,500 metres due to the well publicised effects of global warming. As temperatures change in the future, properties on current ski runs may fall into the commuter property category.
Where to Invest?
Big investors seek property in only the finest and most luxurious resorts such as Courchevel, Méribel, Val D’Isère, LesArcs, and Chamonix. These buyers are aiming high and generally are not considering rental income. This market tends to be more directed towards second-home owners. However, those who are looking to invest in properties in any of these luxurious resorts with an eye to possible rental opportunities will find ‘hautde gamme’ chalets with all the trimmings, usually marketed with hefty rental forecasts.
Another option is the ‘fly-to-let’ market, where buyers invest in weaker resorts or ones with less luxurious accommodation. Snowfall is likely to bemore unpredictable but high rental opportunities exist in these resorts. These ‘weaker’ resorts were once among the most traditional French skiresorts such as Megève and La Tania. They are facing a bleak future if experts are correct in their prediction that a third of European ski resorts will soon be snowless.
Financing your property.
Consider financing your property in Euros with a French mortgage. France and some of its European neighbours are now coming out of the recent global downturn and have not felt the recent credit crunch as badly as other countries. This could partly be due to the strict lending criteria of the European lenders compared to UK and US mortgage providers. French lenders assess eligibility on the applicant’s capacity to repay the loan. Approximately one third of monthly income can be taken up with the applicants existing mortgage, loan repayments and the proposed Euro mortgage.
Leaseback schemes have had some negative press, but they continue to be popular with property investors as it may be possible to take out what is essentially a 100% mortgage. While an 80% LTV (loan to value) of the purchase price, VAT,furniture, estate agents fees and notary fees is generally available for leaseback purchases many developers will refund the VAT upon completion of the property. It is important to consider the rental management companies who are critical in any leaseback scheme, and it also pays to check who will be looking after the property and how long have they been operating for.
Exchange rates.
You should be aware that any overseas investment carries an element of foreign exchange risk. If you live in the UK and your earnings and savings are in Sterling, remember that buying a property in France is not just a property purchase but a currency speculation. There are two options when transferring your funds to France, using a high-street bank or the services of a currency broker. A currency broker such as Baydonhill plc can often offer large savings, a personal service and help reduce your individual exposure to the currency markets.
Far too often, buyers forget the impact that fluctuating exchange rates can have on the price of a property. On average it takes between 6 to 8 weeks to complete a property purchase abroad. Even in just over a month, currency rates can change dramatically and have a real impact on the price of a property purchase. Consider this, in the event that the value of the Euro increase by over 4% against the pound then this would equate to a loss of €8,000 on a typical €200,000 property in France. Imagine the currency impact you would face if you were to buy an off-plan property on the slopes, where the average purchase time can be as long as 24 months.
