Buying a Villa? Read This First!
The French Riviera is a very unique housing market, and there’s a lot to learn if you’re interested in owning a villa here. Nearly 30% of the villas on the French Riviera are second homes, and nearly 8% are “unoccupied” (most of those are used exclusively for vacation rentals). Only 62% are primary residences.
If you’re looking to buy a villa (on the French Riviera, houses are referred to as “villas”) in France, it’s very important that you do your homework! Here is a guide to the things you’ll need to research before putting in an offer on real estate in the south of France:
Trends in the Real Estate Market in France
According to the agents and notaires we consulted, in 2020 properties are sitting on the market until the sellers lower the price to be much lower than others on the market, as they are selling for an average of 30% under original asking. It is a buyer’s market, and will become even more so starting in September 2020 (and for several years to come), as foreign buyers go back to their domicile countries, and as COVID-19 continues to harm the economy and restrict travel.
The overall volume of sales (and prices) for Q1 and Q2, 2020 is deceptive, as many of the sales recorded were transactions that were already in play from before COVID-19. Q3 2020 will show more realistic numbers.
In GDP, the biggest crisis for France was the 2.9% fall in 2008 – but although the market prices decreased, the change wasn’t catastrophic because interest rates were dramatically lowered. The euro debt crisis in 2012 saw a 9.4% fall in housing prices across France over the following four years. But most French economists think that, since interest rates can’t be lowered further, sale prices will fall by at least 10% by the end of 2020 due to the COVID-19 economic crisis, and potentially more if there’s a second and third wave of COVID-19.
Expert Market Predictions for 2021
We consulted a number of top economists, investment advisors, and (honest) real-estate agents and notaires, and these were our findings (this applies to the French Riviera only):
In the very high-end market (€6 million+), the values will likely continue to increase, pulling the market averages upwards.
In the mid-upper end of the market (€3 million to €6 million), villas have been selling for 20% to 25% under asking as of September 2020. While some of the below factors may affect owners in this bracket, in this price range the owners tend not to need to rent / AirBnb their villas. Most owners in this bracket also have enough savings to weather the COVID-19 economic issues without needing to downsize.
The low and mid-range market (€3 million and less) have seen a large dip in selling prices, with many more sellers than serious buyers, and sale prices between 25% and 30% lower than asking. These owners are often elderly and/or relying on vacation rental / tourism or other income that could be significantly disrupted. Expect to see an increase in distressed sales in this segment.
Reasons prices will get cheaper starting in the fall of 2020 and throughout 2021/2022:
- Influx of vacation homes coming to market because of Coronavirus: job and business losses, lowered income, and a decrease in high-spending tourists and AirBnb bookings. These factors will force many people to sell their vacation homes or downsize their primary residence.
- Baby Boomers are getting up there in age and are getting too old or sick to maintain villas, therefore selling their villas and moving into assisted living or apartments. There are not enough Millennials to pick up the slack, based on the lack of population in this demographic, and cultural trends (Millennials tend to prefer the sharing economy: AirBnb versus owning).
- The long-term economic debt cycle is due for downswing, which is very likely to cause a major global recession in the near future.
- Brits and other foreigners now prefer to buy vacation homes within maximum two hours driving distance instead of South of France because of Brexit and COVID-19 (not wanting to fly on airplanes). Parisian buyers are opting to buy property within driving distance from Paris as the frequency, but not the duration, of COVID-19 lock-downs and closures increase.
- Because of Brexit, British people will have the amount of time they can spend in France reduced to only 90 days, prompting many to consider selling their French Riviera vacation homes.
Often, when buying activity slows, it takes some time for homeowners and real-estate agents to adjust their expectations and lower pricing. In the meantime, realistically-priced properties may sell, but properties that do not adjust their pricing will remain on the market, often for years, until they adjust their expectations and lower the price to be in-line with the market (find out how to determine the correct pricing, below).
A warning: Expect real estate agents and notaires to be overly optimistic when you ask about the market, as their income depends on convincing people to buy and sell. They are incentivized to tell you that it’s a super-hot market and prices are going up, as this pressures buyers into feeling like they should buy sooner and for more money, and it incentivizes sellers to list their homes. Even in obviously soft or declining markets, agents and notaires will often tell you that it’s a hot market. Given the misaligned incentives, remember the old adage: ‘trust, but verify’.
How to Find & Read Real Estate Listings
While there’s no single website that has all the listings, there are several websites that aggregate real estate listings, including: Green Acres, SeLoger and Super Immo. Make sure to sort by price as that will make it easier to spot duplicate listings.
In France, some owners opt to sell directly, without using a real estate agent. You can find these listings on PAP and ImmoGo. Since, on the French Riviera, the seller pays for the agent’s fees, there’s no real advantage for a buyer to buy direct.
Listings normally say the number of m2 and pieces (rooms) that a villa has. Each main room, not including the bathrooms, storage or kitchen, are considered a ‘piece’. So a 3-piece is usually a 2-bedroom. Watch out because some agents fluff this a little by calling a 2-bedroom with an extra large living room a 4-piece, so it’s important to double-check. A ‘salle de sejour’ or ‘salon’ is what Americans call a ‘living room’. Some estate agents list rooms as bedrooms even if they aren't what you would consider a bedroom (no windows or super-low ceiling, too small, etc.), so make sure to count in person at the property.
Many listings also show inaccurate building and land sizes, so it’s important to verify using an independent survey before buying. Make your offer conditional on the results of the surveys you’re going to perform, and negotiate the price down if the listing said it was larger than it actually is.
How to Estimate the Villa’s Value
“This is a good price. At this price, this villa will sell very quickly. You have to decide right away!”, real estate agents often say, hoping to rush you into buying an overpriced villa. However, it is not uncommon for the buyer to realize that this was just a high-pressure sales tactic and that the villa is still for sale months later, usually because it’s overpriced.
Similarly, some real estate agencies tell sellers that they can sell their property for more than it's actually worth just to secure the listing for their agency. Then the villa simply sits on the market for years until the seller lowers the price, often several times.
The easiest way to get an estimate of the true current pricing (and the recent sales prices) in a specific area of France is on these websites:
- Check Drimki and SeLoger. These are the most accurate online real estate price estimation websites that are hooked up with real estate databases. When compared with the local m2 sale prices released by the notaires, these websites slant slightly higher, but are very close to accurate. They take into account everything from the street, to details about the villa, amenities and land, then tell you the highest (if it’s in perfect condition with a great view and lots of land), expected (average land and condition), and lowest price (needs renovations and no view) that the villa is worth.
- The JDN website shows trends of real estate prices per town or area over time (see screenshots above), including the high and low price per m2. It also shows interesting information about the types of housing and who lives in them.
- This notaire statistics website shows you which towns / areas are more or less expensive, and you can specify new or resale house or apartment, the property size, and the area or town in your search.
- This government website has an interactive map of France which allows you to click on the area of your choice to see the prices of past sales. Another, similar, government website, Immo Notaires, allows you to enter a specific address or click on a map to find past sales prices (within the last 5 years).
Auctions may (or may not) provide an opportunity for a bargain in France. Usually an auction is chosen to affect a quick sale – perhaps because of divorce, inheritance, or to settle debt. You can find out if there are any auction properties in the area you want by checking the Notaires website.
Properties at auction will typically have a much lower reserve than the market price and all wannabe bidders will need to pay a deposit in advance – which can be anything from 5-20% – if you don’t win the bid your money will be returned. Additional fees may include court expenses, lawyers’ fees, publication fees and more – it is important to check in advance what your obligations are. Here’s some more information about French property auctions.
Things to Find Out
Historical images: Here are some simple ways to see past satellite images of the area so you can see how it’s changed over time (and if that trash on the adjacent property is actually just “temporary”).
Internet access: Does the area or villa have fiber (high-speed) internet? Here’s a map of internet speeds available (you can also search by address), and a map of the areas with fiber, and you can drill down the the exact property. If you know the exact address of the villa you’re interested in, you can check on the Orange website to see what type of Internet is available. If fiber isn’t available yet, you can check out the forecast of when it might get fiber internet. The government has a plan to make sure more areas get fiber access, but they keep pushing the deadline farther and farther, and some streets with few villas may never get fiber, so we don’t recommend you rely on that.
Keep in mind that even if your street gets fiber, not all the villas will be able to get it because of terrain type and incline issues. It's best to buy a villa that already has fiber, since if the villa doesn't already have it, there's no guarantee you'll be able to get it in the future. And not having fiber will become even more of a deal-breaker for buyers in the future, when you want to sell.
All forms of Internet (including satellite, 4G, VDSL, ADSL, etc.) other than fiber have caps, meaning that even if they say “unlimited”, after you download a certain amount of content, the speeds get throttled down to a trickle. So if you’re planning on streaming lots of video (ie. you like to ‘Netflix and chill’), or doing any video calls, you’ll likely need fiber.
Mobile coverage: It’s good to know what the mobile / cell tower situation is for the area you’re considering. Here’s a map of the mobile coverage across France.
Diagnostics reports & surveys: There are a number of surveys that the seller is legally obligated to give you. They’re by no means exhaustive, and some surveyors are corrupt and will lie for the benefit of the agent or notaire, so it’s always good to get your own inspection done as well. While you’re at it, get an engineer to check how the villa is going to hold up over time, structurally.
If the inspections reveal anomalies in the electricity and gas installations, it’s important to correct such problems. You should also check whether such anomalies would have any impact on your property insurance.
Radon: It’s a colorless, odorless toxic radioactive gas that’s the leading cause of lung cancer next to smoking. It comes out of the ground and then builds up inside homes — and it can make you extremely sick. In areas that have high radon, there’s no way to avoid exposure. Here’s a searchable map of the areas with radon, so you know where to avoid.
Risk zones: If the villa you’re interested in happens to be located in a high-risk zone then, in the event of a flood, earthquake, ground movement, or fire that destroyed the property, there is no guarantee that you would be able to obtain planning consent to rebuild or repair your villa, swimming pool, outbuildings, or other structures.
Being in one of these high-risk zones should lower the valuation of the property by at least 20% compared with villas in blue or white zones. This is because it will increase your risks (the risk depends on the type of red zone it’s in), it dramatically increases the cost of insurance (it costs at least €3500 extra per year to properly insure a small red zone villa worth €1 million), it limits the number of banks willing to give you a mortgage, makes it harder to resell, and commits you to paying for risk-prevention measures several times per year.
If your house is damaged by a natural phenomenon, insurers will only process claims once a state of natural disaster has officially been declared by ministerial decree (called an ‘arrêté interministériel’, which clearly defines the zones affected and the nature of the damage), and then you have only a tight 10-calendar-day window to make a claim. The downside is that it can take months for the status to be granted, or the area covered could possibly not include your villa.
If your real estate agent downplays the seriousness of red zone warnings, or tells you that it’s “a decision made in Paris and they don’t inspect each property” — he’s not being honest. Below is an example of a red zone map. It’s incredibly specific and there are many types of risks that are accounted for. Highly educated specialists examine each property in order to assign it to a red zone.
As a buyer, you should be informed (before sending your offer) if the villa is in a red zone, via the diagnostic reports & surveys owners are required to produce as part of the sale process. Sometimes owners or agents try to scam buyers by giving them false or outdated reports, so it’s best to check for yourself. Before buying a villa, make sure to visit the nearest Mairie or Préfecture to ask about the local risk plan and what your obligations will entail. (…and while you’re there, make sure to also ask if there are any building/planning requests for properties near the villa.)
You can also consult the web site which provides information on risk areas and an interactive map showing a layer overlays of each individual type of risk (although the information on the site is not always easy to interpret, and may not be entirely up-to-date). Here’s some more information about risk zones in France.
Cadastral maps: This is the government’s official map showing the outline of the property boundaries and the shape of the buildings on it. You can search for them by address on this government website. You can also check at the Town Hall to see the plans to make sure they match up with what you have been shown and you don’t find out later that your neighbor actually owns half of the garden you thought you were buying. Note: These maps are often inaccurate or outdated (they could have since sold part of the land, for instance), so it’s worth paying to get a survey done.
If part of the villa you’re considering, or the pool or any of the outbuildings, isn’t shown on the cadastral map, that means it was built without proper permits / permission, and the local government could charge you with a hefty fine you and force you to rip that part of the villa down. If the seller didn’t get proper permission, make sure that they do before the sale, and verify it directly with the local Mairie (city hall) and/or Préfecture.
Housing taxes: You can see the trend in housing taxes over time, and by area. Your agent should be able to tell you the taxes that the current owner is paying, but make sure to verify this with the mairie.
More information: Here’s a great guide to help you learn more about buying property in France.
A Few More Things to Consider
The space between your villa and the neighbor: If you are thinking you’ll put up a tall line of trees or shrubs between you and the neighbor, you should know that the Civil Code states that there must be a minimum of 2 meters between the property boundary and a tree that is more than 2 meters tall. The minimum distance for all other plants is 50 cm. This rule only applies if no other rules or uses apply to the region or district. Your town hall will be able to provide details of local laws.
If the town is in debt: Check the historic debt of the area you are considering. This will give you an idea of if the people managing the area are overspending and you’ll eventually have to pick up the tab by way of increased property taxes.
Why are they selling? Find out as much as you can about the situation of the vendor. Ask: “How long has it been on the market” (watch out: many agents will tell you how long they have had it listed, but it could have been listed with several other agents before that…you can double-check by seeing the dates on the surveys they commissioned for the sale) and “Why are they selling?” (again, the answer may not be truthful… the seller is unlikely to admit that there’s a permit to surround the villa with camping, or that a high-rise will soon be built and block the view, or that there are major structural issues with the villa.) It’s up to you to check who owns the nearby plots and what they can be used for.
Don’t just trust — verify: The notary and agents may not be looking out for your best interests, considering they are paid a percentage of the sale price, and they only get paid if you complete the purchase for the villa. Expect this, and keep in the back of your mind that many will tell potential buyers that a villa with major mold and structural issues is “in perfect condition”. Don’t forget: It’s up to you to hire independent experts (who get paid whether you buy the villa or not) to double-check everything.
Buying in the black: Beware of getting involved in ‘paying on the black’, where a seller might want you to pay them directly and conceal part of the price from the notaire. This can help the seller reduce liability to capital gains tax while also reducing a buyer’s purchase costs, however, it is also illegal and can lead to serious problems:
- there are practical difficulties in paying the money and few safeguards.
- the tax authorities may dispute the price if they think it is too low and demand taxes relative to a higher price.
- if authorities think there has been an attempt to avoid duty they will impose penalties, which are payable by the buyer.
- if the property is a holiday home you are liable to capital gains tax on resale and the purchase price upon which the gain is calculated is lower: so the gain is higher.
Your actual costs: Before buying a villa, you need to realize that the sale price is not the only money you’ll be on the hook for. There are a lot of sunk-costs. To close the deal, the notary collects 7% to 8% (for their fee plus government taxes).
Mortgage costs: There’s also a one-time sunk cost to set up a mortgage, which is usually 1.5% (1% mortgage registration, plus 0.5% underwriting fee) of the villa’s sale price, plus around €2000 to €3000 to do a ‘valuation’. Add to that the yearly costs of mandatory mortgage insurance (which costs about 0.5% of the villa’s value each year), and the mortgage’s interest. Keep in mind that, like the insurance, the mortgage interest is a percentage of the villa’s value, charged on a per-year basis, so if your mortgage is 2% interest for a 20-year term, you end up paying the bank 40% (2% x 20) of the villa’s total value just in interest — and normally you pay all the interest first, before you start paying off the actual loan amount. And if you hired a mortgage broker, they charge a one-time % fee on top of that too.
Yearly sunk costs: Every villa owner is also subject to two or three additional taxes, paid every year: tax foncière and tax habitation, plus the wealth tax, if that applies to you. For a €1 million villa, expect to pay around €4000 per year (but this varies). Don’t forget to factor in your new insurance costs (contents insurance and, if needed, red-zone insurance for natural disasters). Plus, some villas have a mandatory fee for community things like a guard, gardeners, etc. You’ll also need to budget for things like repairs and maintenance.
The Buying Process
Before submitting a legally binding offer: Most people submit their first offer verbally or via email. Don’t let an agent pressure you to submit the offer via the notaire. We’d advise you to offer 30% below asking, and start the negotiations there. Of course, all the prices you see advertised have one thing in common: so far, no-one has agreed to pay that price.
Once you know the seller is agreeable to the price, then there are a few things you should do before making the offer official and binding. First, visit the local town hall (‘mairie’) and ask about the property and the neighbors, etc. Find out if any neighboring lots have building permission, and what the natural risks are, check the property’s planning permission history to see if anything was done without permits, etc.
Then, hire an ‘Expert de Batiment’ to inspect the villa and point out any areas for concern (like non-obvious structural problems, etc.) Your seller would not have to disclose any structural defects affecting the property that you will take in the condition in which it stands – although he is not entitled to actually hide them. This means that if, after signing a contract, you discover structural or other defects to the property or its services, you are still obliged to complete the purchase at the agreed price and cannot obtain compensation from your seller. It is, therefore, preferable to commission the survey prior to signing the contract.
Finally, double-check all the other potential issues outlined above (internet connection, radon, etc.), then once you’re satisfied, submit an official offer.
The official offer & deposit: Once you’ve visited the mairie to ask about the property and surrounding area, and you know as much as possible about the area and property, you can make an official offer (called a ‘compromis de vente’). A ‘notaire’ will help you with this.
It’s normal to attach lots of conditions (‘suspensives’) so you can get out of the sale if needed. These include there being no adverse planning restrictions or third party rights which might materially affect your enjoyment of the property; no existing mortgages affecting the property; the results of a structural survey from a qualified surveyor (‘Expert de Batiment’), and no claims upon the property by the local authority or the French State. If contents are to be included in the sale, an inventory (‘inventaire’) should be attached and a separate price allocated.
Notaires: A notaire is basically a real estate lawyer who advises their clients, does the paperwork for the deal, and also collects the government taxes. Expect to add between 7% and 8% to the final price, plus an extra 1% to register a mortgage. The notaire receives about 1.5% of this and the rest goes to government taxes. These costs are fixed by law and are payable in full by the buyer when the sale is completed. Here’s more info about France’s notaires and here’s how much you should expect to pay the notaire. Make sure to get your own notaire — do not use the seller’s.
The deposit: The estate agent may ask for the 5-10% deposit to be paid to them, but it is better to pay the deposit to the notaire, because there is less likelihood of a problem in recovering your deposit if the sale falls through. Be aware, a deposit is only normally recoverable outside the cooling-off period if the sale fails for reasons related to the seller. Otherwise, the deposit is forfeited.
The cooling-off period: You’ll have 10 days (including holidays and weekends) during which you can do more digging and cancel without penalty. After the 10 days, you will lose your deposit if you back out. Since the cooling off period only applies to offers made by a person and not a company, if you want to own the house using a company or a SCI, then you’ll need to make sure that your offer contract (which the notary will write for you) states that you can, at a later date, transfer the sale into a company name.
Using a SCI: An SCI is a fiscally-transparent type of French company that is exclusively used for the ownership and management of property. Many notaires will recommend this, often because they get paid to create them, so figure out for yourself if you want to use one. Here’s an explanation.
Before handing over the money: Make sure to view the villa on the eve of signing the final ‘acte de vente’, so you can see exactly what you are paying for. It could avoid surprises like radiators, shutters or door handles being stripped out, that there has been no damage and that it is empty of all the seller’s possessions. If something’s not right, ask the notaire to hold back part of the price until the property is as it was when the ‘compromis de vente’ was signed.
The final signing: About three months after signing the ‘compromis de vente’ the notaire organises the ‘acte de vente définitif’ signing, payment of the final settlement and taxes and exchange of keys. It is usual to split the costs of the annual ‘taxe foncière’ pro-rata at the time of sale. Make sure the notaire provides a draft of the deed prior to the final meeting, so it can be shown to a professional adviser for comment.
After You Buy
Insurance: Ensure your insurance is not invalidated if the property is left empty for long periods. Most insurance in France give you a 5 or 10-day window from the date of the incident to report it.
If you’re in a red zone, get insurance that covers the value of the property in case disaster strikes and you’re unable to rebuild. If there’s been a natural disaster, policy holders have a limited 10-calendar-day window to start their claim after the disaster has been officially declared, although insurers recommend you do not wait for the declaration and instead lodge the claim as soon as you become aware of damage.
You must not throw any damaged items out: the insurer may call an expert to visit and assess the validity of the claim. If you need to carry out any urgent repairs or cleaning, you should take photos first. You will need to supply a description of the damage, a list of all the lost or damaged items and proof of ownership and their value (receipts and photographs). It is advisable to take photos of contents and email them to yourself or store them online. Make sure the objects are clearly visible; get yourself in the photo to show ownership and fix the date by holding a copy of The Connexion. If you are burgled, insurers want proof of ownership: if you do not have receipts then photos are a fall-back.
Tips for second homes: An unoccupied home is an invitation to thieves. To avoid people realizing that you’re not home, arrange to have mail forwarded to your primary residence (La Poste will do this, for a small fee). To avoid the postbox being stuffed with unwanted advertising leaflets, put a label on it stating ‘pas de publicité svp’. The Ministère
du Développement Durable has downloadable versions.
Renting out your villa: In many towns if you intend to rent out a property (apart from your main residence where you live for at least eight months of the year) you must declare this intention to the mairie. Your income from letting a French home should be declared for French income tax (plus social charges!), even if you live outside France.
Renovating your villa: Firstly, expect that it’ll take three times as long and cost three times as much as you’re quoted. Secondly, verify that the people you hire are all insured and have current SIRET numbers. If you do any work on the villa, save your receipts because you can use them to lower the capital gains tax you’ll pay when you sell the property.