Introduction
We’ve been scouting for a discounted French leaseback deal for the last six months. These are as prized as they are rare, because the French local investment market is so strong and finance so readily available that developers have no need to discount to sell. But we persevered.
It was an old acquaintance from Jonty’s short career in France as a goat-herder (don’t ask) who finally led us to this deal. And what a deal it is. Word of a Parisian, Best Western-branded apart-hotel with a 14% discount, a guaranteed 5.09% net rental yield, VAT cashback, excellent leveraging and low entry deposits saw us embarking on the very next Eurostar to Paris.
Meeting the developer, we immediately snapped up 55 of the 120 units for you – from under the very nose of a French competitor – and negotiated hard to secure a limited-time price 14% below their list prices. To further exasperate our competitor, we even brokered five days per annum free usage for the first three years you own the unit, ideal for families wanting a place to stay for free when travelling to Disneyland Paris or to the heart of the capital.
For the uninitiated, the beauty of a discounted leaseback is that it boosts your rental yield and ensures you have something competitive to offer when selling into the local market. This sort of packaging underwrites your exit strategy. You won’t find a much better location either. Ten minutes from Disneyland Paris and just 35 minutes from the city centre, the four-star world-renowned Best Western Marne la Vallée is in the suburb of Bussy Saint-Georges. The area is a dynamic and expanding business hub which supports the continued growth of the region and ensures your investment has only one way to go – up.
Your investment is more secure too. French leasebacks are the government treasury bonds of the property world – safer long-term investments, with limited downside. The advantage of property over bonds however, is that you can leverage property. In the investment time-frame, you’ll have had a steady guaranteed income, as well as ending up with a mortgage-free asset, worth many times your original investment. It is impossible to do the same in the bond market, unless you’re a risk-taking hedge fund manager.
This is why leasebacks are so beloved by French investors, who buy three or four at a time, to balance out their portfolios and safeguard their retirement plans as well as tax breaks. As these are commercial properties, they can be put into your SIPPs also (please consult your financial advisor regarding this)
So, sensing a renewed vigour and confidence in the French economy, thanks to the election of economic reformer Nicolas Sarkozy, we say: “Vive la France!”
Read on to find out how you can get all the VAT back and exit capital-gains free.
Best wishes,
Jonty and Alise Crossick
The Sarkozy effect
The election of Nicolas Sarkozy as president in May 2007 marked a new era in French politics. His campaign to rejuvenate the French economy with reformist economic policies is bringing a new confidence to the French business world and global attitudes towards it.
His initiatives include: tax incentives to increase productivity by encouraging an extension of the 35-hour week; a shift away from income and inheritance tax towards VAT and environmental tax; schemes to support council house owners in buying their own properties; and an overall drop in taxation of 4%3.
The clearest indication of his intentions with regards to France’s property market was his declaration that he wants to turn the country into
“a nation of property owners”, as the Guardian reported (31/05/07) in an article entitled “Sarkozy pins dream on bricks and mortar”:
“… the French president, Nicolas Sarkozy, yesterday stepped up his plans for a Thatcherite homeowners’ revolution, as Socialists warned that his incentives for French buyers could send house prices soaring.”4
The article goes on to state:
“He said this week that home ownership was ‘everyone’s dream’ and, when asked in February what he would do if he won the lottery, he replied he would ‘buy a house’.”
Furthermore:
“Currently only 57% of French people are homeowners compared to 70% in Britain and 84% in Spain, but Mr Sarkozy wants to turn the figures around and create a “nation of property owners”.”
He is introducing substantial tax breaks to enable more of the
population to buy property, which is predicted to trigger a revolution in the housing market.
More broadly speaking, his policies will open up the French economy to international business, as well as encourage and facilitate an entrepreneurial streak in the local market. This increased confidence could increase the number of new businesses, improve employment prospects and boost salaries. This is expected to lead to people wanting – and being able to afford – higher quality properties in desirable areas.
Business owners, swelled by increases in profits from raised productivity and reductions in tax, would be looking for further investment opportunities and the property market will again benefit. This could cause a significant increase in capital.
Business confidence has already risen since Sarkozy was elected5. France now has the best opportunity in decades to realise its enormous economic potential. With the Sarkozy effect just beginning to be felt, now is the perfect time to get in early, as the property market really takes off.
France’s strong education system, good health provision and excellent infrastructure have contributed to a consistently, albeit slowly, growing economy. This has been achieved despite poor government economic policies. It is widely expected that the vigorous and more pugilistic Sarkozy will allow France to reach its potential.
3. http://news.bbc.co.uk/1/hi/world/europe/6357899.stm
4. http:// www.guardian.co.uk/france/story/0,,2091815,00.html
5. http://news.bbc.co.uk/1/hi/business/6244314.stm