Investing in an investment property or in a studio in Paris remains a particularly interesting option, whether you are a French resident or a foreigner. However, it is important to take into consideration the many tax rules to avoid being in default vis-à-vis the legislation. The figures speak for themselves with an average increase of 22% in 10 years throughout France, more than 90 million tourists each year and an average rental income of 6%.
What are the necessary conditions to invest in a property in Paris?
Whether you decide to buy in the French capital or in a city on the outskirts, the conditions are scrupulously the same. It is necessary to obtain a bank loan to make an investment property in Paris. Unless you have the necessary cash, but few people find themselves in this situation.
As a bonus, it is imperative to make your contribution, because it is an additional security for banking establishments. Generally, it will average 20%. It is also necessary to take all the time necessary to find the property of your dreams and to conclude the sale, the passage at the notary remains obligatory.
What is the right approach to obtaining a bank loan?
If you are a foreign investor wishing to make a real estate investment in Paris, it sometimes happens that the banks in your country do not agree to grant you a bank loan when you plan to buy in Paris. Rather than give up on your project, continue in the right direction by turning to a French bank.
Unfortunately, the current economic conditions are more difficult and therefore banks are reluctant to grant you a mortgage. You must therefore demonstrate your financial strength, but also a personal contribution of at least 20%. Moreover, the average personal contribution is around €55,000 on French territory. Of course, you will discuss this element in detail with the bank.
The taking into account of the tax in the context of a real estate purchase in Paris
A real estate investment in Paris remains subject to VAT. In France, the legal rate is set at 20%. If you acquire a new property, it is a budget of about 3% of your project against 7 to 8% if you invest in the old one.
But in France, a reduced VAT rate of 5.5% remains possible, but only when it concerns the acquisition of a main residence and in a sensitive area. In other words with the name QPV meaning Priority District of the City's policy. Another possibility is to invest in an urban development and renewal area. These are privileged areas for a main residence, but not for rental investment.
Do not forget either the acquisition costs that you will pay during your visit to the notary. The emoluments are absolutely necessary and they consist of both disbursements, that is to say the sums of money to be committed to carry out the various documents necessary for the sale, but also state taxes. More specifically the collection of departmental law, departmental law and municipal tax.
What methodology should be applied to find a property in Paris?
The least we can say is that you are spoiled for choice when it comes to the professionals you should turn to when investing in real estate in Paris. By getting closer to real estate agencies, notaries, developers, dealers, apartment hunters, institutional investors or by going to auctions.
First, get to know the real estate agents, because they are specialists in the field with a perfect knowledge of the Parisian real estate market. Their specialty remains the connection between sellers and buyers and the professional will listen to you with the greatest attention in order to understand your needs. You make contact, but remember to choose only agencies with an excellent reputation such as Orpi, Century 21 or Stéphane Plaza.
Notaries are a less known channel, but just as interesting for investing in Parisian real estate. They are ministerial officers with a particularly well-stocked client portfolio. They will be very useful to you in finding the property you are looking for. In addition, the notarial office often remains established in the agglomeration, which implies a very good knowledge of the market.
Apartment hunters are very valuable for foreign investors. Indeed, you do not have the knowledge and the time necessary to find a property in Paris. The professional will accompany you to find the property of your dreams according to your budget and according to your expectations. For a successful search, communicate the size of the property, its preferred location, the presence of additional services, etc.
Why invest in real estate in Paris?
Many French cities have a very good attractiveness. These are above all large agglomerations and therefore with particularly significant economic development. But investing in Paris remains a top choice, as you will get very good profitability, usually 3% in normal times.
Profitability is likely to increase considerably with the approach of the 2024 Olympics. Many tourists will flock to the capital and moreover the municipality of Paris has undertaken many works with the aim of improving public transport. Whether for a long-term rental investment or for tourists, you will generate comfortable income. Especially with the Airbnb platform, because rentals generate a profitability two to three times greater than annual rentals.
So, by opting for a property ideally located, you could expect a return between 6 and 9%.
Why is the rental yield so high in the French capital?
The major attraction of the City of Paris is not its rental yield, but rather its positive evolution of land values. Indeed, it is difficult to find a property available for less than €10,000 per square meter. In the most beautiful districts, it is not uncommon to see certain properties being negotiated at €17,000 per square meter.
A substantial price, of course, but already well below central London with apartments selling for between €18,000 and €23,000 per square meter. This is also the same observation in New York. This is why many investors are moving towards the French capital in order to realize a capital gain quickly.
How to invest safely in real estate in Paris?
As in any country, there are unscrupulous scam artists out there who will try to lure you into their net. However, if you follow our tips, you will make your real estate investment perfectly safe.
Never trust people who are not recognized as experts in real estate investing. Choose only agencies with a storefront and avoid all out-of-the-ordinary ads. In addition, the sale of a property is systematically accompanied by an energy performance diagnosis or DPE. You will also find documents concerning natural risks, termites and asbestos.
If you acquire a property with energy label G, it has been impossible to rent it since January 1, 2023. But beware, this ban will gradually extend with class F housing from 2028 and Class E accommodation from 1 January 2034.
A favorable real estate market despite the rise in interest rates
Investing in Parisian real estate is an excellent way to escape the economic crisis. Land is still in demand and it is a safe haven rather than investing in volatile values. But the cost of real estate is rising rapidly and your investment will be directly dependent on your financial capabilities.
Over the years, your investment will increase in value and in the meantime you will generate comfortable income allowing you to repay the monthly payments of your mortgage.
Is it legal to acquire real estate in France when you are a foreigner?
Rest assured, the legislation remains favorable in this direction. Therefore, if you do not have French nationality, you can perfectly acquire a property by having the same obligations and the same rights as a French citizen. In this context, the principle of equality applies regardless of your nationality.
In France, the right to property remains sacred and inviolable. It is simply article 17, enshrined in the Declaration of the Rights of Man and of the Citizen of 1789.
As you can see, all the lights are green to make a Parisian investment. If in doubt, get support from a professional with unfailing rigor to find the property that will allow you to generate the most possible profitability. Preferably, in a favorite area for the 2024 Olympics. An interesting opportunity to generate additional income, but also a land value gain.