Posted by admin in Property Letters | September 18th 2008

Dear All,

Vicky and I arrived back last week from a wet and windy Cape Town to Cannes with the “Festival International de la Plaisance” – The 31st Cannes International Boat and Yacht Show – in full swing. Billed as Europe’s foremost in-water showcase there are 650 of the worlds finest yachts and multihulls on exhibition, many of them over 30m, and many being unveiled for the first time ever. What a sight to get back to! Each of our ports and the Bay of Cannes is truly buzzing with activity, and the boats themselves resplendent in the lovely autumn warmth and sunshine. Ahh!

The reason for it all is of course that the “Show” is an exceptional business event bringing together boatbuilders, service providers, equipment manufacturers, interior designers, marinas and the press, plus visitors from around the planet.

There is no question – Cannes really does these events so well!


A colleague was at a property seminar recently. It was attended by leaders of property related sectors such as insurance, leading developers and the French chamber of notaries.

One of the keynote addresses was given by the national President of the Chamber of Notaries and these are some of the points he had to stress:
•    The volumes of sales of New-builds are down 30% on 2007.
•    However there remains a shortage of accommodation and in some areas prices are still rising – notably in areas of Paris and the French Riviera by 6% and in Montpelier by 4%.
•    Banks are stricter in their financing but keen to lend where deposits are reasonable – meaning 40% to 50%.
•    No across-the-board drop in prices is being seen, and few discounts are being given.
•    France is not caught up in a crisis born of a speculative property market.
•    French people are the least indebted in Europe!
•    The UK and Ireland are the most indebted.
•    In the context of Europe France remains strong and confident, and although sales are taking longer, the Chamber of Notaries senses no crisis.

Those are positive and warming words for us and our investors from the people who are at the heart of the market.

Straight from the mouth of a banker friend – they are issuing mortgages as usual, but where a client might previously have been offered a 70% mortgage they are offering 65% or 60%. There is little demand at the bottom of the market however, whereas “the high end continues as normal”.


There is no feeling of a sense of panic here. I have had a series of meetings since my return and there is a feeling of bemusement at what is happening across the channel and in the U.S. and a feeling that “they borrowed to the hilt didn’t they” and “we didn’t”.

It’s true that French banks have been conservative lenders, and have always insisted on strict vetting of borrowers’ financial strength before lending. Furthermore “buy to let” is of no interest to the lenders. Our investors who have jumped through the hoops for French banks already will know that “future rental income” was not taken into account by the banks, sometimes to our annoyance. We thought them unreasonable, especially when they would only lend us 50%, or 60% on a good day!

The market in Cannes is a very mature market. It is not a “first time house buyers’” market. It is quite separate from the market for suburban housing or residential blocks in cities and towns across Europe and the UK which are certainly vulnerable. That is not to say that some sellers are not feeling sufficient pressure to present us with some attractive buys, and most of those we find are coming from UK and Irish owners who are in a spot of bother back home and looking to raise a bit of liquidity. On the whole however, the reaction we are witnessing is that there is not much on the market – owners are saying “this is not the time to sell, we don’t have to sell, so let’s wait until things improve because we are not interested in substantially dropping our asking price.” Of course there are a few exceptions, but very few “for sale” signs.


I had lunch with Lao yesterday and he was interesting on this subject. People in business have to come to Cannes (and he had no big forward-bookings in the name of Lehman Brothers thankfully!) however he is finding that they are more price-sensitive than they were. He believes he can turn this situation to his advantage.

He will shortly roll out a marketing campaign aimed at his business clients everywhere in which he will portray hotel standard “serviced apartment” accommodation as a low cost alternative to hotel accommodation. There are many who balk now at hotel prices, and we, with our good stock of apartment accommodation are well placed to provide a viable alternative for their visits to Cannes – but he also has to price the apartments correctly. There has been a tendency which he abhors for some people to exploit business during peak periods (like MIPIM and the Film Festival). He believes that this has to STOP – he’s always hated that trend and perhaps the new and difficult environment will wipe some of the “sharks” out of the game. We hope so because they do our industry no favours.


LEASEBACK – A different way to invest:

Leaseback was initiated more than 30 years ago by the French government to help provide tourist accommodation to an ever expanding demand for holiday accommodation. It was a plan designed to help the French government cope with demand while offering attractive incentives to investors.

Facts the government have to deal with:
•    80 million people visited France last year – making it the most visited country on earth.
•    France is the world’s 5th largest economy, and regarded as one of the most stable.
•    Politically France is stable too, a leading light in the E.U. (Sarkozy is the current president), and one of the five permanent members of the United Nations Security Council.
•    Transport services to and from France are highly developed (by air, sea and land) and internal communications are regarded as some of the best in the world.
•    France is blessed with favourable weather and some of the most stunning scenery in the world.
•    And as the world’s third largest destination for international direct investment….

So what is leaseback exactly?
Leaseback is what the name implies – It is a scheme created by the French government in which you invest in an apartment and lease it back through a reputable management company specific to that development for a period of (normally) 9 or 11 years. They take care of everything.

•    You own the property freehold, but all administration and responsibility for rentals is taken care of by the management company for the duration of the lease.
•    At the end of the lease you may withdraw or renew the lease on newly negotiated (improved) terms.
•    Your yield is guaranteed for the duration of the lease and normally it is between 3 – 6%, and it is adjusted or indexed to the « cost of construction » index as published by the government.
•    V.A.T. of 19.6% is waived on new buildings, giving you an instant equity windfall.
•    Up to 80% repayment mortgages are available (lending banks like leaseback) and Capital Gains Tax at the end of a 15 year mortgage term reverts to zero.
•    There are no restrictions on non-residents.
•    For French tax purposes there are many allowances so that you will pay almost none – interest on your mortgage for example is deductible, depreciation on building and furniture is deductible, as are legal and accountancy fees and land taxes (fonciere).
•    Furnishing, decoration and insurance are all included in your purchase price.
•    Under certain schemes and if you wish to you are able to use your apartment for a certain period each year for free, either for certain fixed dates or by arrangement and at reduced rates.
•    You may sell your apartment at any time, however your purchaser will be bound by the terms of your leaseback contract – he will take over your contract with the management company for the balance of the term remaining.


We have been offered up to 20 one bedroom apartments in a top class development, working in conjunction with a trusted professional with a great deal of experience in “leaseback” specifically.

This is what it is:
•    23 apartments out of 144 in a “4 star” development.
•    40 kms from Paris.
•    20 minutes from Orly International Airport.
•    Situated in 55 Ha dominated by a magnificent 14th century castle.
•    The castle is operated as a top-flight hotel.
•    18 hole golf course.
•    Spa, Jacuzzi and fitness centres.
•    Focus on company events and teambuilding, events, weddings, seminars, golf.
•    Gastronomic restaurant.
•    All apartments are in double storey buildings, many of them overlooking the golf course.
•    Apartments range from 35 to 42m², with terraces.
•    Prices range from 130 000 to 180 000€.
•    3 Weeks free occupancy per year to the owner and his family.
•    Delivery Q1, 2010.
•    Reputable and recognised developer.
•    Reputable and recognised management company.
•    The term of this particular lease is 11 years.
•    Guaranteed 5% return (On purchase price less furniture) for the duration of the lease.

Financial basics:
Let us use this real apartment as an example – less expensive alternatives do exist:

Price including VAT (19.6%) and furniture        172 061
Furniture                          11 353
Actual net investment                143 954
Saving realised through VAT refund              29 197
Mortgage fees                            2 302
Notary fees                             5 162

80% mortgage over 25 years at 5.85% (fixed rate).
Capital required 28 773 plus mortgage and notary fees.
Amount of loan 115 091.
5% Annual yield on actual net investment 6 729.
The monthly shortfall starts at just under 200€ per month, reducing slowly until in year 17 the monthly shortfall becomes a monthly surplus.

60% mortgage over 25 years at 5.85% (fixed rate).
Capital required 57 545 plus mortgage and notary fees.
Amount of loan 95 318.
5% Annual yield on actual net investment 6 729.
The monthly shortfall is less than 20€ per month for the first four years until in year 5 the monthly shortfall becomes a monthly surplus.

Some buyers would like to have a bigger apartment in the long term and are requesting to buy two adjoining units in order to be able to conjoin them in the future. This is possible.

Normally the lending bank will allow that repayments start after delivery of the apartment, and in the interim all that is payable is a life insurance premium of about 30€ per month and obviously some bridging charges.

Please let me know your intentions. For those interested far more detail, photos, plans, financials and brochures are available.

I will be away until 5th October but will receive e-mails intermittently – and will engage fully with you and the project immediately after my return.

This new dimension to our “normal” offers something for those who have found the amount of deposit required to get into French property too daunting. This is a more affordable way of getting into the French property market. It is also infused with safeguards, benefits and government backed incentives which might be particularly attractive to some of us in unsettled economic times.

Whichever way you look at it, leaseback is a very good long term investment vehicle.


Thank you for reading and I hope that the information has been useful and interesting. I have highlighted (below) just a few of the most affordable apartments we have come across since our return. In a later Property Letter I will get back to the higher end of the market.

As always, please let me know if you would rather not receive these Property Letters and I’ll remove your address from the list.

Please have a look at our website – comments would be welcomed:

With kind regards,


Properties in ascending price order.

•    The prices quoted are asking prices only.
•    The selection offered in the Property Letter represents a few properties chosen from many, so if what you are looking for is not here, we can tailor-make our search for you.

Palm Beach New-Build.
One bedroom apartment.
•    36m² of living space.
•    1st floor of 5.
•    Construction 2007 / 8
•    Living and dining area.
•    Kitchenette.
•    Bathroom.
•    Separate toilet.
•    Exposition – east.
•    View of buildings and streets.
•    Terrace.
•    Garage.
•    Asking Price – 250 000€

We have 3 one bedroom apartments in this new block.
This one is the least expensive.
It is a luxury residence in Palm Beach, and there are not many able to be built any more. It is a stones throw from the beaches of the Moure Rouge (the eastern side of the peninsula) and a couple of hundred meters from the Croisette and the beaches of the western side, and Cannes centre. The apartments are equipped with air conditioning and electric shutters, but the kitchens have to be installed according to the purchaser’s choice. (Budget 6 000€). The garage is a valuable asset to have.

Plage du Midi.
One bedroom apartment.
•    44m² of living space.
•    Ground floor.
•    Exposition – south west.
•    View of the terrace and greenery.
•    Living and dining room.
•    Separate kitchen.
•    Bedroom.
•    Bathroom.
•    Independent toilet.
•    Cellar.
•    Garage.
•    32m² paved terrace!
•    Asking Price – 255 000€

This apartment is well situated just a minute’s walk from the beaches of Plage du Midi, and a couple of minutes to the Old Port of Cannes, the restaurants, markets and the Palais des Festivals. (Centre for conferences). It has electric shutters, double glazing and air conditioning, but will require some work to bring it up to a reasonable standard for renting.

Rue d’Antibes.
One bedroom apartment.
•    29m² of living space (but it’s in the attic and has floor space that is lower than 1.8m and is therefore not counted)
•    4th floor of 4.
•    South facing.
•    Construction 1948.
•    Living / dining room.
•    Bedroom.
•    Open plan kitchen.
•    Shower and toilet.
•    Asking price – 255 500€

This entirely renovated top floor apartment with sloping ceilings and wooden beams is right in the centre of Cannes. The building is in good condition and there is a lift. With the ceilings near the walls being lower than the specified minimum (1.8m) the surface area is actually greater than the 29m² stated, as can be seen from the photos. It might be possible to get the furnishing included in the price. It is a very attractive apartment, ready to work.

Rue 24 Aout.
One bedroom apartment.
•    42m² of living space.
•    4th floor.
•    View over rooftops.
•    Exposition – East.
•    Construction – early 20th century.
•    Bedroom.
•    Living room.
•    Kitchen and dining area.
•    Shower with toilet.
•    Asking price – 265 000€

This apartment is ideally placed – you can’t easily get any closer to the Palais, so amongst conference delegates it is very popular. It has no lift and it is a small building, but the staircase is wide and the common areas are well maintained Rue 24 Aout is a small and quiet street. Some renovation to raise the standard would be a good investment.

Ave de Madrid.
One bedroom apartment.

•    42.62 sq.m. of living space.
•    Ground floor apartment with large sunny west facing terrace.
•    Construction 1986.
•    Exposition – west.
•    Living & dining room.
•    Bedroom.
•    Open plan kitchen.
•    Shower.
•    Separate toilet.
•    Reversible air conditioning (hot and cold)
•    Garage.
•    Cellar.
•    Asking Price – 277 000€.

This apartment is in a good building a couple of hundred meters from the beaches and Port Canto at the eastern end of La Croisette, and before entering the Palm Beach Peninsula. The owners have made an excellent job of maximising the space available, the floors are newly retiled in earthy beige, and the walls repainted with quality finishes (stucco in the living area and entrance hall). The bathroom and kitchen are modern and well equipped and cupboards throughout the apartment are generous. The living room, bedroom and kitchen all open through glass doors to the sunny patio / terrace which is very spacious, paved, and bordered by a mature and impenetrable coniferous hedge. The apartment comes with a lockup garage and a cellar in the basement of the building.

Petit Juas.
Two bedroom duplex.

•    100m² of living space.
•    2nd & 3rd Floor of 3.
•    Bourgeois building – built 1902.
•    Exposition – South / West.
•    View – across the pretty suburb of Petit Juas.
•    Very generous living and dining area on 2nd floor.
•    Well equipped and spacious open plan kitchen with views to the east.
•    Two upstairs bedrooms.
•    A bathroom on each floor.
•    Narrow balcony runs the length of the 2nd floor.
•    Asking price – 480 000€.

This lovely apartment has been very well renovated. The furniture could be negotiated into the purchase if desired. The house that this apartment forms a part of has only two owners – the ground floor is used for storage by the people who live on the first floor, and the common areas, the façade, the stairwell etc are in very good condition. It is a charming house that forms part of a street of charming houses. It’s a lovely and up-and-coming area of Cannes, just five minutes walk down to the Rue d’Antibes and the centre. The price is attractive so I don’t think it will stay on the market for long.

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