Notes from a Dordogne Estate Agent

Afraid of purchasing Dordogne property due to euro crisis?

2011-12-06T02:15:00.000-08:00

Doom-mongers abound in the present euro crisis. The collapse of the eurozone is predicted by pundits on both sides of the Atlantic. The general uncertainty has paralysed the Dordogne property market for two months. Everyone's worried about a collapse. But I'm not convinced.

Generally, the level of comment is as disappointing as President Sarkozy's production of sickly rabbits from his euro-hat. In common with many others, I have grown mistrustful of press releases announcing an instant fix. As time has moved on, the full scale of the complexity has emerged.

Why I don't believe the doom-mongers

In spite of the chorus of doom-mongers, I still don't believe them - for two main reasons.

First, none of them has focussed on the logistics - or indeed the meaning - of the "collapse" of the eurozone. Let's take it at its simplest,and assume they mean that one or more countries reverts to its previous currency: the Greeks go back to the drachma, the Portuguese to the escudo. It sounds simple enough. However, it requires the production of new notes and coins and the conversion of bank systems. In a letter to the Financial Times on December 2, Malcolm Levitt pointed out that in 1994 the working party of the European Commission Association for the Monetary Union of Europe, which he then chaired, convinced the authorities that these tasks could take up to two years, following several years of advance notice of the changeover date. A speedy change is impossible on these grounds alone, without taking into account the series of legal and financial issuees that have to be resolved along the way, such as the exchange rate that would apply on the changeover and the impact on existing financial instruments denominated in euros. In the transitional period Eurozone states would have to continue their euro borrowing in a climate of total uncertainty.

The second reason why I don't believe the doom-mongers is that Germany simply can't afford a collapse of the eurozone. The German economy is driven by manufacturing exports to both the eurozone and outside. The cost of these goods is held down by the euro. If the eurozone collapsed, the strength of the Deutschemark would be such that exports would become uncompetitively priced, damaging the German economy substantially.

As Angela Merkel has realised, the eurozone is a one-way street without turnings off.

So why's it all taking so long?

Yes, it seems as if the agony is more that of a dying than a recovering patient. But again, the level of comment has been poor. It's easy enough for Messrs Cameron and Obama to preach the importance of urgency: easy too for Christine Lagarde to do the same, though possibly with more authority and tact, from her new office at the IMF. But here are some of the problems.

First, the awareness that markets can exercise such power over national economies and governments has taken time to filter through to political leaders. At the beginning they were incredulous and bewildered. Now they are beginning to realise that the political landscape has changed. The markets' attitude to continued state borrowing is rather like that of a benevolent banker who has tolerated the extravagance of an aristocratic client for years, but feels that the point has come when he has to protect his own interests. The clients have had to adjust their thinking. But this has taken time.

Secondly, concerted action among the seventeen eurozone member states - let alone the twenty-seven EU member states - cannot be achieved easily or rapidly. If the culture and history of France and Germany are radically different, the gap is nothing compared to that between, say, Poland and Portugal or the Netherlands and Greece. Their leaders have not only to appreciate the changed political landscape but also the need to come together from their very different backgrounds to find solutions.

Thirdly, solutions are themselves not simple. The imposition of financial discipline on weaker Member States cannot be achieved without effective sanctions - not an area in which the European Union has excelled in the past. The rôle of the European Central Bank is obviously key but is likely to involve far more than the European treaties originally contemplated. Member States are going to have to increase their financial contributions at a time when their economies are already stretched. Last but not least, any closer union that involves scrutiny and approval by Brussels of member states' budgets implies an important surrender of sovereignty.

So there's the problem: on the one hand the knowledge that a eurozone collapse cannot be entertained; on the other, an environment of such complexity that final solutions will take time.

Continuing down the one-way street

In the situation I have described, volatility is likely to continue. Currency and bond traders in London, New York and Tokyo are unlikely to appreciate the finer detail. Their task is to earn a decent buck for their bosses. But my own belief - borne out perhaps by the fluctuations in short-term bond prices when member states have sought finance in recent weeks - is that there will now be an important synergy between the markets and member state governments. If a eurozone collapse is unrealistic, the markets will nonetheless provide a system of sticks and carrots to ensure that the eurozone member states navigate their continuing journey down the one way street without grinding to a halt.

In the meantime, the Dordogne property market remains moribund. What better time to buy?

Antony Mair
MCM Dordogne Property

2011-10-27T06:45:00.000-07:00

Selling your Dordogne Property – changes in capital gains tax

The French government has now completed its reform of French capital gains tax on sales of property. How will it impact you? equally, how will it impact the moribund market for sales of Dordogne property?

The original draconian proposal

Like other European governments, the French state is strapped for cash. An overall review of tax breaks in the course of the summer homed in on the regime applicable to sales of second homes. This favoured a lengthy period of ownership, with the capital gain being reduced by ten per cent for each year beyond five years of ownership. Sales were thus free of capital gains if they took place fifteen years or more after acquisition.

The government's initial proposal, presented at the end of August, was complete abolition of this system with immediate effect, resulting in gains being fully taxable, regardless of the period of ownership. They offered a slight sweetener, in the form of an indexation allowance, by reference to increase in the cost of construction.

A compromise solution

The French Parliament considered the reform too drastic. A compromise was finally reached. The original mechanism of tapering relief was retained, but the period and the percentages adjusted.

First, the percentages: the capital gain is now reduced by 2% for each year after the fifth year following acquisition, by a further 4% for each year after the seventeenth year, and by a further 8% after the twenty-fourth year. This means that thirty years of ownership results in exemption from capital gains tax.

Secondly, the rates: 19% by way of tax and 13.5% by way of social charges, giving an overall rate of 32.5%.

The impact on non-residents

French capital gains has always applied to the sales of French property by non-residents. If the vendor is resident in a European Union member state, the rate is 19%. If not, it will be at the rate of one third of the gain. Social charges will not apply.

Although the changes in the French system will result in more French capital gains tax becoming payable, this will not necessarily increase the taxpayer's total bill. UK-resident taxpayers, for example, will be required to pay UK capital gains tax, with a right of deduction of the amount paid to the French. Although the impact will vary from person to person, the overall amount may be the same after the reform as before. The same is not true for those resident in the Netherlands, since the Dutch do not have a capital gains tax.

There is however an important effect on French-resident taxpayers selling property in the UK. Since the amendment to the France-UK double tax treaty, which came into effect at the beginning of this year, sales of UK property, exempt from UK capital gains tax for UK non-residents, became subject to capital gains tax in France. The reduction in relief for length of ownership, and the increase in the rate of social charges, may have a material effect on a UK sale under the new regime.

And the good news?

Well, everything's relative, but there are two rays of sunshine in the gloom. First, there was originally a proposal to extend capital gains tax to the principal residence. This has been abolished. Secondly, the new system will not apply to sales where completion takes place before 1st February 2012.

Impact on the Dordogne property market

The buoyant property market in Paris and other major French conurbations is at stark odds with the Dordogne and other regions of France – particularly those where the English bought in force in the good years. It is in our view unlikely that English buyers will be much influenced by the capital gains tax changes seen in isolation. The position may well be different for persons from other jurisdictions, such as the Netherlands or the United States. As part of a wider picture, however, in which we see increasing aggression of the French tax authorities in their fiscal policies, coupled with uncertainty over the economies of the eurozone countries and the future of the euro itself, this reform will not help a market that is showing little sign of life.

Antony Mair
MCM Dordogne Property

New septic tank rules for Dordogne property

2011-08-15T06:57:00.000-07:00

Vendors of Dordogne property have had a new concern, following the introduction of a new regime for septic tanks at the beginning of this year. At the time the preliminary contract is signed, the seller is now required to produce a certificate of compliance in relation to any septic tank arrangements. If the certificate fails to state that the tank complies with current regulations, the buyer is required to remedy the situation within a period of twelve months after completion.

Who produces the certificate?

Although the vendor is responsible for obtaining the certificate, it is produced by the local authority's drainage department – the Service Public des Assainissements Non-Collectifs, known as a SPANC. In the Dordogne the SPANC is often set up by a group of communes who share the cost for this and other functions: a Communauté des Communes.

If you need a certificate you should therefore contact your local SPANC. If in doubt about how to do this, contact the mayor of your local commune.

Two points need to be borne in mind. First, the owner himself is the only person who can ask for a certificate. The SPANC will not deal with estate agents or other representatives. Secondly, the SPANC cannot deal with requests rapidly, because of pressure of work. It is likely to take several weeks for the certificate to be issued and any uncertainties clarified. Since the certificate will be needed at the time the preliminary contract is signed, vendors should contact the SPANC sooner rather than later.

Can I rely on an old certificate?

You can rely on a certificate dated less than three years prior to completion. We have found that a certificate within the three year period that is issued by the water authority, rather than the SPANC, has been accepted by the notary, since some SPANCs have only been set up quite recently.

What happens if my system does not comply with regulations?

If the SPANC tells you that your septic tank installation does not comply with current regulations, you can take some comfort from the fact that you will not be alone. Any septic tank installed more than five years ago is likely to be defective in some particular.

To remedy the system will necessarily involve expense. This will vary from property to property, but a guideline figure for a new system to be installed for a two or three bedroom house is likely to be in the region of 10,000 euros. A new system may not be required if it is only part of the current installation that is found to be defective. For example, it may be necessary to add a grease trap or extend the length of a soakaway.

Who bears the expense of rectifying the system?

The SPANC certificate has the same status as the surveys on termites, asbestos and other matters that are part of the seller's pack. It provides information. The one difference, as regards septic tanks, is the obligation placed on a purchaser to rectify a non-compliant system. The question of additional expense therefore becomes a more urgent issue.

A purchaser faced with non-compliance of a septic tank installation will need to have some idea of the cost involved, and then decide whether to proceed or to seek a reduction in price. In practice, this becomes another item of negotiation in the sale process. In the present market, where buyers exercise considerable power, vendors may find themselves having to swallow a further reduction to enable the sale to proceed.

What should Dordogne vendors do?

First, see whether you have a certificate issued that is less than three years old. If you don't, contact your local SPANC as soon as possible and ask them to inspect the system and issue a certificate. Secondly, if you then find the system is not compliant, establish exactly what will be required to make it compliant and then get a quote. Armed with this, you will be able to assess the extent to which you are prepared to contribute to the cost. Ideally, any remedial work should be undertaken before the sale, so that a clean certificate can be produced to a delighted purchaser.

Antony Mair
MCM Dordogne Property

The Dordogne Property Market in July 2011

2011-08-04T00:17:00.000-07:00

It's been a strange year in the Dordogne - and equally strange in the world of Dordogne property. On the weather front, we had uninterrupted sunshine from early Spring to the end of June. Then - just as the holidaymakers began to arrive for their summer break - the clouds came in. The weekly concerts arranged by our neighbourhood café have been rained out for four of the past six weeks. Our local rock festival - Le Grand Souk - escaped the worst, but generally it's been pretty drear. In international politics we've been entertained by the DSK episode, on tenterhooks over Greece and the eurozone, and alarmed by the US dithering over its debt.

As for Dordogne property - we thought last year was bad, but this year seemed to be even worse. Then suddenly - like the proverbial London buses - several offers came along at the same time and were accepted. I would like to think that this is the beginning of an upturn in the cycle. However, like all lights at the end of a tunnel, it may be an oncoming train.

It would be nice to draw some neat conclusions about the state of the market. But frankly it's a bit of a lottery. Demand remains weak. On the supply side we have taken on far fewer properties than last year, leading us to think that people are holding back, and waiting for better times to come - or perhaps just changing their plans.

As for buyers, it's difficult to generalise. As you would expect with the continuing weakness of sterling, British buyers are scarcer than before. We have noticed a tendency among some prospective buyers from the UK to put in very low offers, and then to be surprised if either they are not accepted or another buyer pips them to the post. The lesson here is simple: not everyone is desperate to sell so don't think there's a clearance sale!

That said, prices are soft. There are sellers who will accept reductions of up to 20% - but it's not necessarily the norm.

The impression we have is that the predominance of UK buyers is a thing of the past: we are now showing to people from elsewhere in the eurozone as well as to prospective buyers from the Middle and Far East.

What remains a constant is the basic quality of the product. The Dordogne will always be an attractive place to live, with stunning countryside, easy access to the UK and a wealth of property that is full of character and history. Once prices have adjusted - and it looks as if we are close to reaching that point - normal service will resume.

Antony Mair

MCM Dordogne Property

The Dordogne Property Market in 2011

2011-01-17T07:01:00.000-08:00

January's the time when everyone predicts developments in the year ahead – so what better time to look at what is likely to be happening in the Dordogne property market?

The present situation

The Dordogne property market is basically seasonal, with househunters visiting the region from the Spring through to the autumn. Start and end dates tend to vary with the weather. The "grey pound" is manifest at the beginning and end of the period, outside the school holidays, while families will take advantage of the school holidays to search as a group. So the winter months, from December through to the end of February, are usually the quietest.

No surprise, then, if I start by saying that the position is not radically different from the autumn of last year, with prices depressed and a lot of stocks on the books. That means, of course, that there are bargains to be had where vendors are obliged to sell, for personal or other reasons. In March 2007 we took on a house for sale at 649,000 euros. Under the pressure of a bridging loan, the vendors reduced the price gradually but had difficulty in finding a buyer, until they reduced the price drastically to 367,500 euros in the autumn of 2010, when it sold immediately. Another property originally started at 1,170,000 euros but only found a buyer when the price had been reduced to 712,000. In both cases the buyers had looked at a number of other possibilities and recognised a bargain when they saw it.

Prices in 2011

Statements about French property prices rising need to be taken with a pinch of salt. Paris prices have soared because of a shortage of supply. Demand on the Côte d'Azur remains good, we understand, although prices there have fallen more than agents are prepared to admit. In the Dordogne prices remain stagnant, because of the excess of supply over demand.

Part of the reason for the drop in prices was the impact of exchange rates on British demand. The pound fell at its lowest to a point close to parity with the euro. But as the pound has recovered – at the time of writing it is worth around 1.19 euros – prices have not moved. Exchange rates are therefore only part of the picture.

When the pound collapsed, British vendors intending to repatriate funds were able to take advantage of the strong euro to achieve a decent return in sterling, in spite of lower French prices. However, with the pound now hardening, those intending to repatriate funds will receive less for their euros. They may be caught in the pincer movement of a strengthening pound and a sinking property market.

In practice, the impact of the exchange rate is likely, in our view, to make prices harden, while the excess of supply over demand will prevent them rising.

Should you sell?

The Dordogne property market is not particularly volatile, so the position is unlikely to change materially over the next six months. Some commentators predict a further strengthening of the pound, to a level of 1.30 euros, so this should be factored into any risk analysis. Equally, however, predictions concerning the UK property market are fairly gloomy, so if you want to repatriate funds for a UK purchase you may not lose out.

In our view, the most important decision is how you want to lead your life. Hanging on when you want to be somewhere else may simply be frustrating and, in the long term, become unendurable. You should take a careful look at the way you want to live over the next five or ten years and then consider the price you will have to pay. Is there a downside? Is the cost worth it? only you can decide.

One thing we are certain of: any sale price needs to be at a realistic level, taking account of agents' advice. Don't fix a price by reference to what you need to buy elsewhere. Prospective purchasers are interested in the price you're selling for. Your own purchase plans are irrelevant to them.

Should you buy?

It remains a good time to pick up a deal. Prices are generally depressed, and a number of properties have been on the books for longer than owners are happy with. Don't think vendors will accept any derisory offer you may care to make. Each vendor's position will be different. Shop around and take advice. But don't delay too long over your decision to buy, since one thing is sure: the property market is always changing, like everything else. In six months or a year the position may well be different.

Antony Mair
MCM Dordogne Property

The Dordogne Property Market – October 2010

2010-10-11T03:11:00.000-07:00

It has been an up and down year - literally - for the sterling/euro exchange rate. At the beginning of 2010 the pound began to gain in strength, moving from 1.10 euros to just short of 1.24 in June. Numerous were the sighs of relief in the Dordogne as expats felt the strain on their budgets ease a little. Some of us dared to hope that the end was near, and that the climb would continue.

Alas it did not, and we are now back to 1.14 or so.

Impact of the exchange rate on Dordogne property

British buyers, who account for a large proportion of purchases of houses in the Dordogne and Charente, are deterred by high exchange rates. When the euro is strong, demand falls and prices follow. This is why prices of Dordogne property fell by 30% from mid-2008 to mid-2010, reflecting, with slight delay, the fall in the pound from 1.48 in January 2007 through 1.35 in January 2008 to 1.04 in 2009.

After the doldrums of the twelve month period from mid-2009 to mid-2010, when all estate agents were complaining of lack of business, there was a flurry of activity in the summer, when the pound strengthened. At last, we thought: signs of improvement. But it appears that, with the onset of autumn, activity has once again diminished.

Rises in prices?

What of prices, meanwhile? There have been some self-serving articles in magazines serving the "Buy property in France" market, indicating a rise in prices in the region. One of our French vendors said that prices were climbing in Paris so of course they are climbing in the Dordogne and Charente as well.

I too have read that the price of real estate in Paris has been rising. My understanding is that this is in part due to a shortage of stock. But I am no expert on Paris property. I do know one or two things about Dordogne property, however: and if prices are not falling they are certainly not rising either. The situation is fairly stagnant.

An abundance of stock

In the period between October 2009 and September 2010 we took on some 80 properties in the Charente and Dordogne. In the two previous twelve-month periods we had taken on a mere 50 in each. We are a small agency and do not take everything on that is offered to us, so these figures are conservative. What is important is the 60% increase.

The exchange rate has done all it can to depress prices. Vendors have been able to recoup a euro capital loss to some extent by repatriating funds to the UK at a more favourable exchange rate. But we are now at a point where the sheer quantity of stock on the market, far in excess of the amount required for weak demand, is inevitably going to prolong delays in finding a buyer. As a result, vendors may find themselves inclined to reduce prices further in order to achieve a sale.

The economic outlook

The UK's economic situation is currently uncertain, with many people concerned about the impact of governmental cuts. Journalists and economists are talking about a double dip recession. Clearly there is a bumpy ride ahead, and no rapid recovery in sight.

Other areas of the world are less beset by gloom: we have been encouraged by purchasers coming from the Middle East, the Far East and Australia. There have also been a number of prospective buyers from the UK, defying the economic climate and attracted to the Dordogne for all the usual reasons. But even if demand is stronger than before, it remains insufficient to absorb the amount of property on offer.

So the outlook continues uncertain, with no easy solutions. Property well-presented at the right price will continue to sell. But many vendors will have to remain patient for a while longer before there is any material improvement.

The green, green grass

The good news is all for buyers: an abundance of choice and low prices mean that it is an excellent time to buy. Prospective purchasers we have met have all been of the view that the time is right, and have often been fortunate in having funds available. They have been able to strike good deals and join the ranks of property-owners in the Dordogne and southern Charente with enthusiasm for this beautiful part of the world and the life-style it offers. Sometimes vendors need to forget about the grass on the other side of the fence and look at their own. It may be greener than they thought.

Antony Mair
MCM Dordogne Property

2010-06-30T07:35:00.000-07:00

Why are Dordogne estate agents so expensive?

People looking for Dordogne property who are accustomed to UK estate agents' commission of 2% or less often express shock at the amounts charged by French agents. Our own flat rate of 5% may seem high: believe it or not, we're cheaper than many of our competitors. Commissions as high as 8% are common.

To understand the different environment of Dordogne property, you need to understand the economic forces behind an estate agency. In essence, there are two: the drive to profit, pushing rates up; and the pressure of competition, pushing them down.

The upward force

While the basic job of UK and French estate agents is the same, in practice they are vastly different.

First, the French move house less frequently than the British. So the volume of transactions is smaller. Secondly, the French population is dispersed over a much larger area than the British. We take properties on within about a 50km radius of Ribérac – about an hour's drive. As a result, accompanying buyers on viewings is vastly more time-consuming than it would be in the UK.

So: fewer transactions per annum, and more time spent on each, with both buyers and sellers. Against this, the overheads of a Dordogne estate agency may well be much the same as in the UK. For those involved in international sales, indeed, they will be higher, since agents have to advertise both in France and abroad, increasing the overhead.

More work drives up overheads

In addition, the Dordogne agent immobilier has an advisory role that goes way beyond the function of a UK estate agent. In the UK, once the agent has obtained an acceptable offer, he will pass the matter to a solicitor. Apart from periodic checks on progress, his role is over. But France has no real equivalent of a solicitor. As in other Continental countries, the notary is the person responsible for giving ultimate legal effect to the sale and purchase. The notary is also required to give legal advice – but he does so in an objective and informative way, rather than espousing the cause of a buyer or a seller.

French law requires estate agents to adopt an advisory role. Many of our professional colleagues keep this to a minimum. However, we believe that this is an opportunity for the Dordogne estate agent, rather than a gap. We prepare contracts in bilingual format, guiding buyers and sellers through the preliminary legal formalities. Obviously we are aware that we have conflicts of interest, but we try to steer our way through them, making sure that both sides are aware of what is involved and telling them that they are perfectly entitled to get impartial legal advice from a third party if they wish.

All of this takes time and expertise. We do it for no additional remuneration – it comes from the commission we charge.

The downward force – competition

Obviously there is a ceiling to the amount an agent can charge. If one agent were to charge 50% where others charge under ten it is unlikely he would get much business. But I have to say that the price competition among Dordogne estate agents does not appear so strong as to force rates down.

Where a seller gives his property to a number of estate agents – as is usually the case with Dordogne property - French competition law requires the net sale price to be the same. In this way there can be price competition among the respective estate agents. Since properties are advertised at a commission-inclusive price, it follows that the agent with the lower commission will advertise the property at a lower sale price than his competitors. It pays for buyers to shop around.

However, this does not seem to occur as much as you would expect. At the lower end of the market we are currently charging two thirds of the rates charged by our competitors. But there is no evidence that this price differential is bringing more buyers or indeed sellers. People seem to be remarkably accepting of the rate charged, regardless of its level. As a result, the downward force of price competition is less strong than you would think.

In a nutshell: Dordogne estate agents are more expensive than UK ones because they have more to do, with less transactions in number, than their UK counterparts, while suffering similar overheads. And it is likely to stay that way so long as price competition remains weak.

Antony Mair
MCM Dordogne Property

2010-06-17T06:17:00.000-07:00

The Dordogne Property Market – June 2010

The long lean period for Dordogne property – and indeed for property in the adjacent area of the south Charente - shows no real sign of easing. In February this year I informed our clients that prices had dropped by some 25% over the past two years. A recent article in the Sud-Ouest was of the same view – except that the figure quoted for country properties – in the Sarlat area at any rate - was 30%. British buyers, who formerly accounted for 25% of purchases of character property, now amount barely to 10%. Since the volume of transactions has declined by 50%, this indicates that the number of British buyers has declined by 80%.

The exchange rate and UK buyers

Contrary to what many may think, the glorious days when the pound was close to €1.50 were back in 2007. In June 2008 it was at €1.26, and a year later at €1.18 – not a mile away from the present rate of around €1.20. It follows that a drop in prices of 30% represents a considerable market adjustment. To put it in concrete terms:

Price of property X in summer of 2008: €200,000
Cost to UK buyer in pounds in 2008: £158,730
The same property after 30% reduction: €140,000
Cost to UK buyer in pounds in 2010: £116,666

This is a net reduction for a UK buyer of 26.5%.

Have all prices reduced?

Briefly: no. Sellers will all have different circumstances to consider. There are, for example, those who say they are in no hurry to sell, and are happy to wait for an upturn. The difficulty in this position, as we have pointed out to them, is that supply currently outstrips demand to such an extent that, with reducing prices, their property will simply look too expensive and be ignored. Nor is there any sign of an upturn in the near future. It is more likely that prices will gradually firm up before increasing materially. If you are in no hurry to sell, and don't want to reduce your price, we advise withdrawing your property from the market.

At the other extreme is the seller in a hurry to sell, because of family or other pressures. In these circumstances there is no alternative but to slash the price drastically by – we recommend – some 30%. This will not guarantee a rapid sale, but at least it puts you in prime position.

Should all sellers reduce their prices by 30%?

Not necessarily. Some sellers may be uncomfortable about doing this, representing as it does a considerable downgrading of a major asset. However, some reduction would be appropriate in any event – if only to take account of the extent to which supply is outstripping demand.

But how much should this be? The position may be clearer if we adapt the example laid out above:

Price of property X in summer of 2008: €200,000
Cost to UK buyer in pounds in 2008: £158,730
Cost to UK buyer in pounds in 2010: £166,666
Amount achievable for £158,730 in 2010: €190,476
.
In other words, a reduction of 5% in the euro price keeps the property at the same cost in sterling. Our advice is to make as substantial a reduction as you can afford. Buyers will be looking at value for money. They are currently able to pick and choose. Price is of major importance.

A good time for buyers – where are they?

In the circumstances I have described you would expect the buyers to be flooding in. Indeed, for anyone with ready cash there are numerous excellent opportunities to make a killing.

However, although visitors to our website are running at about 40% more than at the same time last year, this is not yet translating into an increase in buyers on the ground. As regards British buyers, indications are that they are not yet feeling bullish about investment. The UK's economic situation, prospective changes in capital gains tax legislation, the continuing difficulties of obtaining credit, not to mention a general awareness of the need to reduce personal indebtedness, all contribute to a climate of uncertainty.

Reports on the French property market as a whole usually comment on the decline in British buyers. In certain areas – such as Paris and the Côte d'Azur – there has been an influx of purchasers from Russia and the Middle East. But the Dordogne and south Charente represent a somewhat different market, which does not offer the same appeal to this kind of foreign buyer.

What of French buyers?

The reduction in transactions in the Dordogne is not entirely accounted for by the absence of the British. French buyers – who tend in any event to favour newer and more convenient properties - have been finding it difficult to obtain loans. Furthermore, the French economy and prospective reforms to the French pension regime are likely to cast a continuing shadow over the property market.

What lies ahead?

The Dordogne property market is no different from other property markets in that it is cyclical in nature. Sooner or later there will be an upturn, however gradual. We take comfort in the fact that the UK and other European countries are at last facing up to their economic problems and taking appropriate action. The fact that visitor numbers to our website are climbing is a source of cautious optimism. But the timing of a recovery remains uncertain.

Antony Mair

MCM Dordogne Property

2010-03-24T14:05:00.000-07:00

What can a vendor take from his Dordogne property?

Horror stories can be heard about purchases of Dordogne property, where a buyer has come into a house after completion and found it stripped of everything, even the fitted kitchen. Dordogne estate agents rarely advise on what should be included in a sale, and notaries rely on people being familiar with the basic principles. Neither the agents nor the notaries think that things may be different in the home country of the purchaser. An English purchaser will come with certain expectations, which may be rudely disappointed.

The English legal position

UK purchasers are familiar with the expression "fixtures and fittings". However, few of them will be able to state what the legal definition of these is. Briefly, in the UK a "fixture" is anything attached to the property, while a "fitting" is something not so attached and therefore not usually included in a sale. In deciding what is "attached" and therefore a fixture, it is usually said that items screwed to the walls, floors or ceilings are "attached" and therefore fixtures, while if nails are used they are not. In strict law, this is not necessarily correct.

Because this is something of a grey area, it is now standard practice in the UK for an inventory to be prepared of what is included in the sale, whether fixture or not – in other words, proper fixtures such as curtain rails may be included but it may well be that the curtains hanging from them are not.

The French legal position

The French position is not radically different from that in English law. The distinction in French law is between "immovable property" ("immobilier") and "movable property" ("mobilier", giving rise to the related word "meubles" for furniture). When you buy a house you are buying an "immeuble" - "immobilier". Any related sale of "mobilier" needs to be separately itemised or documented.

The "immeuble" you are buying will necessarily be the house and land. However, certain items are considered as being so much a part of the house that they are transformed from being "meubles" to part of the "immeuble". The French legal term for these is "immeubles par destination".

Two categories of immeubles par destination

There are two categories of immeubles par destination. First are those items that are necessary for the proper use of the property, regardless of any physical connection. These are particularly relevant in the sale of agricultural or industrial property. For example, if a working farm is sold, the farm machinery, necessary for the proper usage of the property, are considered as part of it, as would fertiliser etc. stored on the property. The position regarding livestock becomes more complicated under decided cases, and it is prudent to specify in the deed what is included and what is not.

In the case of an investment property, this category would extend to such items as would be considered necessary for a rental property, including shower cubicles and bathrooms.

The second category of immeubles par destination is more relevant in the sale of ordinary houses. These are items that have been attached to the structure of the house. The French courts have decided that the attachment has to be "apparent and lasting". The Civil Code gives as an example items that are cemented in to the structure, and which cannot be removed without damage either to them or to the structure itself.

The priest's view

Our local priest in Ribérac was recently speaking about an organ he had acquired from a church in Périgueux that was being deconsecrated. He said that the new organ had been fastened to the structure of the church with three screws and thus became an "immeuble par destination", whereas, he maintained, two screws would not have had the same effect. Since parish church buildings in France belong to, and have to be maintained by, the commune in which they are situated, the usage of three screws rather than two had successfully transferred the task of maintaining the organ to the local council.

This has to be taken with a pinch of salt. The fact is that there is probably as much uncertainty over what is an "immeuble par destination" in France as there is over what is a "fixture" in the UK. Unscrupulous sellers will take advantage of this by removing everything they can, and rely on the buyer not taking any action.

The steps for a buyer to take

In these circumstances it is prudent for a buyer to require an inventory to be taken of what is included in the sale of the property and what is not. If this is done before the signing of the compromis it avoids any subsequent dispute.

In reaching agreement on this point it is useful, in my view, to retain the distinction made in English law between matters screwed to the wall and those that are not. Bookshelves are a case in point. A single shelf may not amount to a fixture, but a fitted set of shelves probably will. Light fittings such as chandeliers, hanging from a hook in the ceiling, will not usually be considered as "immeubles par destination", although the hook itself may well be. Curtain rods are in my view often "immeubles par destination", although a vendor may not agree, and a purchaser may well not want the old rods in any event. A freestanding kitchen unit will not be an "immeuble par destination" but a fitted kitchen will be. Bathroom fittings and central heating equipment are usually considered as part of the structure of the house.

So the advice is to get a list made with the assistance of the agent and then to inspect the property before completion to check that items agreed as being part of the property are still there. That way you will avoid any unpleasant surprise.

Antony Mair
MCM Dordogne Property

2010-03-08T06:02:00.000-08:00

The impact of energy costs on the value of Dordogne property

The other day I had a telephone enquiry from someone considering installing solar panels for heating their house in the Dordogne countryside. She asked whether it would make a difference to the value of the house.

I told her that, in the present market, you could not reckon on recovering your investment in energy-saving heating on a sale. In other words, a house that is worth 350,000 euros will not suddenly be worth 360,000 euros if you spend 10,000 euros on energy-saving heating.

At the same time, there can be no doubt that a house that has an economical form of heating will be more attractive to buyers than one that doesn't. Going back to what I've written before about the state of the market: supply currently exceeds demand, so if you want to sell that Dordogne house of yours you will need to make it more attractive than the other properties on offer. If a house comes up for sale that has annual heating costs of a few hundred euros it will be more attractive than an identical property where annual energy bills are in the thousands.

Trend towards greater importance of energy consumption

The current issue of La Revue Bleue, the magazine sent to members of the French estate agents' association FNAIM, contains a detailed examination of the property market in France. A note about changing attitudes to energy consumption caught my attention. It appears that the question of a property's energy consumption is becoming increasingly important when people are deciding whether to make a purchase. A survey established that it was an "important factor" for more than 90% of French buyers and "very important" for 50%.

We have noticed that buyers are increasingly put off by houses without central heating. But I think it is likely to go a little further than this.

At the end of a long hard winter we are all looking at ways in which we can economise on our heating costs. Insulation, double glazing and more efficient boilers are all on our lists. For the more adventurous there are reversible heating systems, solar heating and geothermal solutions. All of which have a cost, even if government subsidies are taken into account. Nor will they necessarily be appropriate in all cases. But the cost of heating is becoming more important to each of us. And it will necessarily be the same for buyers in due course.

There is no doubt that in the current market an efficient central heating system will make your house a more attractive option to sell. An old boiler and single glazing will be minus points. But I think that the trend noted in La Revue Bleue will take matters to a new stage. In time, energy-efficient heating is likely to become the norm, and buyers will expect houses to be properly equipped. If it is not, the price is likely to be downgraded by the amount a buyer considers he will have to invest to achieve a reasonable heating bill.

So you have a choice: either do something now and maintain the value of your Dordogne property, or leave it and suffer the consequences when you come to sell. And while you wait, the bills continue to come through that drafty letterbox.…

The Dordogne Property Market in February 2010

2010-02-25T01:32:00.000-08:00

A lot of Dordogne estate agents are talking up the market at the moment, so it's a good point to look at what's actually happening and why. To listen to some, you would think that queues had started, with wallets stuffed with euros falling from their pockets as buyers hurtle off their Ryanair planes. Although things are better than they were, the reality isn't quite like that.

The economic background

Let's look at the incontrovertible first. The whole of Europe is still in the throes of recovering from the most dramatic economic crisis to hit it for decades. The recovery is in progress, but it's slow. The UK has been particularly badly hit, and the pound is finding it difficult to rise against the euro, currently hovering around the level of 1.14 euros to the pound. UK banks are still reluctant to lend, aware that levels of personal borrowing have to be reduced before stability can return to the banking sector. There is considerable political uncertainty, with an election looming in May.

France overall has been coming out of recession slightly ahead of the UK. The French banks have not been so badly hit as the UK ones, and there is not the same difficulty with loans as there appears to be in the UK. The Dordogne, however, is in something of a special position. Local industries, initially unaffected by the global crisis, have in some instances been closed by foreign owners wishing to source production in countries with lower labour costs. Agricultural incomes continue to decline. Tourism remains an important source of income but has been adversely affected by reduced spending from the British.

Equally incontrovertible is the fact that, of foreign property-buyers, the English have been traditionally the most numerous, followed – some way behind – by the Dutch.

It doesn't take an Einstein to realise that none of this makes for a particularly buoyant property market. But let's have a look at things in a bit more detail.

The supply side

Over the past two years or so an enormous amount of Dordogne property has come onto the market. Much of it is still sitting there. French owners move less often than the British, and sales tend to occur because of one of the three "d"s – death, debt or divorce. A number of local British, more used to moving house every five years, have decided that, for family, health or economic reasons, they want to return to the UK. The result is a good supply of stock at all levels.

The demand side

The number of visitors to our website, and the enquiries received by email, is currently some 80 per cent above that of the same period last year. So the good news is that there is considerable revived interest.

After this the position is slightly different between UK and French buyers.

UK Buyers

Here buyers of Dordogne property have become more discriminating and demanding than before. First, the exchange rate has made them much more aggressive on price. We are seeing properties transfer at up to 25% below an asking price fixed before "the crash". This is partly because of the exchange rate, but also because of the excess of supply over demand.

Secondly, we have found that the appetite for major renovation has considerably reduced. The reason is straightforward. Building work by good local craftsmen has never been cheap, and has become considerably more expensive as a result of the increase in VAT from 5.5% to 19.6%. Add in the impact of the exchange rate and you can see that the cost of a major renovation is likely to result in capital expenditure that may not yield any return. To give a concrete example: a renovation that in 2005 would have cost 100,000 euros, or (at then rates) £70,000, will now cost 114,000 euros, or (at today's rates) £100,000. That is without factoring in any increase in the cost of labour or materials.

Thirdly, buyers have become used to a better quality of finish in the UK and will consequently be more demanding in what they see in renovated properties in France.

Fourthly, we have found that people are less keen to move to the Dordogne on a permanent basis than they were before. This may be transitional: but the impact of the exchange rate has hit most Dordogne expats extremely hard, and for the moment a lot of people who would formerly have thought of a permanent move to France are now sitting on their hands.

French buyers

The French market is different. Buyers of Dordogne property comprise (a) those with families who are relocating to the Dordogne for professional reasons; (b) those seeking a weekend or holiday home; and (c) those seeking to retire to the Dordogne – often returning to their roots.

The first category will inevitably be looking for houses close to schools. The second and third categories will look at properties in a different way from British buyers: less romantic in their approach, they will in our experience be keenly aware of energy costs and may look more closely at the state of electrics, heating and insulation than their British counterparts. At the risk of generalisation, they may be more likely to buy a recently-built house, knowing that it will be cheaper to maintain. They will in all cases drive a fairly hard bargain.

Summary

Where does this leave us? From the above I think we can draw a number of conclusions.

First, the good news: interest in Dordogne property is reviving, and the usual buying season – from Easter to the autumn – will almost certainly be better than last year.

Secondly, the not so good news: supply of Dordogne property exceeds demand, which means that prices have been forced down. In addition, buyers are more choosy, preferring the completely renovated property to the unrestored.

How does this affect you?

As we regularly point out, a fall in prices is not necessarily bad if it accompanies a weakening of sterling against the euro and you wish to repatriate your funds. If you bought a property in 2005 for 300,000 euros you paid £200,000 for it. To get your price back at current rates you could sell for 228,000 euros.

What is trickier is where the property you have has been poorly renovated or renovated below the standard people now require. In this case you may have to reduce further, or simply wait and see if the market improves.

We have no crystal ball to tell us what the future holds. The normal cyclical movement of the property market would imply an improvement, but there are so many uncertainties in the present case that we wouldn't be prepared to go out on a limb with a forecast.

The real solution, if you're unable to achieve a sale of your Dordogne home and don't want to undertake further improvements, is to make the most of it and enjoy the wonderful lifestyle of the region. That was, after all, the reason you came here in the first place!

Antony Mair
MCM Dordogne Property
3 place du Général de Gaulle
24600 Ribérac

Those spreading acres in the Dordogne…

2010-02-18T10:05:00.000-08:00

Deep in every Englishman – or perhaps not so deep – is the country squire. Every owner of a small house in the UK seems to yearn for acres of land. But is it a good idea?

We had a client recently who was searching for a Dordogne property – a largely predictable wishlist, and we showed him what we had. But it turned out that the gardens were too small. He wanted a hectare of land – about two and a half acres. The client in question was in his early fifties. He lived in the home counties and had a fairly standard back garden – for argument's sake 150 feet long by thirty wide. He was fond of garden and obviously wanted to expand his horizons.

Obviously, as a Dordogne estate agent, I am not going to take people's life decisions for them. These are grown people who can make up their own minds. But I have to ask whether it is sensible for someone to take on this amount of land as a garden.

Creating a burden for yourself

Leaving aside the small minority of people who are avid gardeners and who are happy to be outside in all weathers, the majority of us want to have an attractive environment in which we can potter around without feeling under pressure. And that's the point: if you have too big a garden it soon becomes a burden. It's fun designing it all, laying it out, planting it up. But after a few years, when it's established, there's a danger of the fun wearing thin. Do you want to spend your days weeding? What happened to your original dream of a house in the Dordogne where you could sit on the terrace sipping a glass of wine?

By the time your garden is established you are likely to be around sixty. Unless you are fortunate enough to be able to afford gardening help, you will find yourself becoming increasingly oppressed by the burden you have taken on.

The hazards of letting the farmer cut your grass

Of course, you may just want to have the security of space around you, and the knowledge that nobody will build. You may have a friendly farmer next door who says he will be happy to cut the grass in your field – no need to pay him, since he can use the grass for his cows. It all seems fine, doesn't it?

The only problem is that if you don't pay the farmer at an arm's length rate, French law will imply an agricultural tenancy. The result is that, without your realising it, you will have a tenant for your field. No bother, perhaps. At any rate not until you come to sell.

When it comes to a sale the farmer will have a pre-emption right over the land where he is cutting the grass. Moreover, the terms of his implied tenancy will be such that you will not be able to get rid of him without his agreement. So your land may suddenly be reduced in value for an incoming purchaser.

Double whammy

So there you are – a double whammy of giving yourself a backbreaking burden and granting someone rights over your property without realising it.

Why not let me show you somewhere with a courtyard garden that you can garden intensively to your heart's delight? after which, you can have that drink you always dreamt of…

Valuations of Dordogne Property

2010-02-04T23:29:00.000-08:00

I heard my partner Paul having a telephone conversation with some clients the other day that was fairly representative of the problem that often arises when people come to sell their Dordogne property. Unlike some Dordogne estate agents, who give an instant valuation – sometimes over the phone without actually going to see the property – we go and have a look as if we were taking it on, then go away and think about it. Paul then has the lucky task of ringing the clients and telling them our view.

On this particular day he gave the figure, then paused. I couldn’t hear what was happening the other end, but I heard him say: “From your reaction you’re obviously not happy about that”. So I knew where we were at. The client thought we had grossly underestimated.

Valuing houses is not an exact science – particularly not in the case of Dordogne property, where no two are the same. The first basis is a comparison with any similar property that has recently sold. In a market as slow as the present one has been over the past twelve months that may be difficult. The second basis is a comparison with other houses on our books – particularly those where there has been a degree of purchaser interest and some feedback on price.

None of this is possible for a private individual. This is why the agent is asked for a valuation. Estate agents act according to their best lights, but are not infallible. Sometimes we get it wrong. But on the whole our record on valuing is pretty good.

However, the reaction I heard the other day is not unusual. For people selling, their house is probably their most important asset. It is something they treasure, something they have worked on over the years, and are probably now selling with reluctance. Like us all, they think of it more in terms of the value to them than the value on the open market.

What then happens is that they need time for the reality check. We usually recommend that they get another agent in for a comparative quote, so that they can at least have two opinions.

If the reality check hasn’t worked, and they still think we have underestimated, they are likely to come back and ask that we put it on our books at the figure they want. Sometimes they say “We can’t afford to sell for less than this”. This usually happens where they have seen another property that they want to buy.

This puts us in a difficult position. Sometimes we refuse to take it on at the price the vendor names, since we believe it’s a waste of everyone’s time. Although this is probably the right thing to do, it will also mean that we forfeit the vendor’s goodwill and will not have a chance to come in later when – as almost invariably happens – the price has to be reduced to the level we have advised. We also know that other Dordogne estate agents will be keen to take on the property at any price, and then work on the vendor afterwards.

The alternative course we are moving towards is to take the house on for a stipulated period of – say – six months, at the price the vendor wants, and then to review the situation at the end of that period in the light of any purchaser reaction we have had. If there have been no enquiries at all it may well be that the price is too high. The disadvantage of doing things this way is that you are going round the houses to reach the ultimate goal of a sale.

So the advice is: listen to the agent; get another valuation if you think appropriate; review your plans in the light of the valuations received; then put it on at the price recommended or put off the sale altogether if you don’t think it will net you the amount you need.

Antony Mair

MCM Dordogne Property

http://www.riberacproperty.com