A good time to think... French

ALTHOUGH the euro/sterling exchange rate is looking rather sad from the British point of view at the moment, don't despair.

With French property prices stabilising (a reported increase of 3.1% during the first quarter of 2008) and attractive mortgage rates still available in France, now might just be the time to call in those negotiation skills and snap up a bargain.

The average price of French property rose by roughly 130% over the last 10 years, with regions such as Languedoc-Roussillon and the usual suspects of Paris, Cote d'Azur and the Alps coming out on top.

It makes sense, then, to look to the lesser known regions where bargains are still possible.

Better links to France can only improve accessibility and new direct flights to Paris will open many more doors.

The region directly surrounding Paris, prime commuter-belt territory, is still expensive even in Guernsey terms, but by travelling just outside this area, the situation is far more favourable.

For example, often overlooked in favour of its neighbour, the Pays de la Loire, the region of the Centre nevertheless shares many of the same attractions – numerous chateaux and the Loire meandering its way through beautiful countryside to name just a couple.

With the vibrant and historical capital of Orleans close by and house prices well below the national average, it can also represent good value for money.

For the shrewd investor, leaseback schemes are popular all over France. With a guaranteed rental income and the possibility to obtain a refund of the VAT paid on purchase (currently 19.6% for new-builds), these schemes can be very attractive indeed.

But before you jump onto that plane, it is important to know the implications of buying in France. Firstly, how are you going to own the property – in your own names or through a French property holding vehicle? How can you protect your spouse or children should the worst happen? What are the consequences of French succession law and inheritance tax and how can you best structure your estate to plan for them?

Owning French property will make you liable to local taxes (taxe d'habitation and taxes foncieres) but what will your other running costs amount to?

As Channel Island residents, are you prepared to file French tax returns and possibly have to pay a notional income tax charge for owning a property in France, even if you don't let the property?

Are there any ongoing French VAT implications for leaseback purchasers that you need to be aware of?

Guernsey does not have a tax on capital gains, but France does.

What impact will this have when you come to sell the property?

The list could go on – but don't let that put you off.

Buying a property is always a nerve-racking experience, especially in foreign climes, but it can be a rewarding, enjoyable and potentially profitable experience as well, as long as you get the right advice beforehand.