Roche & Cie

Buying Real Estate in France : New-build or old?

This question, must have at least crossed the minds of all those considering a property acquisition once : is it better to buy in new or old buildings? The dilemma is not just a matter of price. Besides the expectations and the lifestyle of future buyers, there are many other factors that can influence this decision.

On the French property market, Old buildings and properties still represent the majority with nearly 465,000 transactions in 2016 compared with about 380,000 new modern properties. However, the latter is progressing considerably due to many attractions and financial advantages.

Let’s analyze the advantages and disadvantages of each real estate program.

New buildings:

New dwellings offer functional and modern living spaces, but also many guarantees to cope with unpredictable circumstances. What are the main advantages of new housing programs?

 

Recent and modern standards

Unlike the older and ancient French buildings, new dwellings provide quality services since they are mostly still in line with the latest standards. They therefore comply with all the regulations concerning thermal insulation, sound insulation, but also in terms of installation of plumbing, electricity, ventilation, heating, accessibility for people with reduced mobility, etc.

The advantage of buying designed new properties is the possibility of modifying the said plans so that they fit your taste and needs.

 

A solid guarantee level

The acquisition of a new property has numerous legal guarantees.

Once the keys of the new dwelling are in possession, the owner remains free to play for two years the damage insurance against the manufacturer’s works under the guarantee of “perfect completion”. This protection makes it possible to take care of all types of repairs, including when they affect equipment that is not an integral part of the building, such as carpentry (shutters, windows, etc.).

To this first layer of protection is added the famous “decennial guarantee”. The manufacturer is liable for ten years for any workmanship that would jeopardize the stability or viability of the building (major cracks, waterproofing of the walls or the roof).

 

Favorable property features

By investing in the new programs, one can qualify for advantageous tax provision. For example, the loan at interest rate 0%, an interest-free loan to finance the construction or acquisition of new housing, with or without any further construction works or the Pinel device.

(contact us in case you’re a non-resident)

 

Less Fees and Taxes

Although they are more expensive than older real estate, new homes have lower charges. New housing partially offsets its high price by lower costs at both acquisition and throughout the subsequent years.

Let us note the importance of the absence of transfer taxes which entails low fees of notary.

It is also possible to take advantage of a VAT reduced to 5.5% if the building is not far from an ANRU zone (urban renovation). One can equally benefit from an exemption from the property tax for the first two years after the completion of the work.

With the new construction standards, one can finally hope for a significant gain in purchasing power in the long term thanks to savings on the heating bill.

 

A project that requires time and money!

The price per square meter of new homes is 15 to 20% higher than the cost of the old one, which is enough to deter a large number of potential buyers.

The acquisition of a brand new property requires a lot of patience. In the case of a sale in the future completion state (VEFA), 18 to 30 months can easily elapse between the signature of the booking contract and the day of the handing over of the keys. This wait is long and constitutes an undeniable stress for the future owner. The latter can not give blind trust to the contractor and must keep a constant eye on the development of the project and the completion of the project.

 

Old real estate

With a considerable stock of housing and real estate, the old buildings offers a huge choice to future buyers, and therefore a significant margin of negotiations. However, the guarantees are less important and the tax system more rigid.

 

Numerous properties available quickly

In view of the quantity of goods offered for sale, the old dwellings have sufficiently diverse characteristics to enable the ideal apartment to be found. Extensive surfaces, perfect geographical location and the character of the old building are among the traditional assets.

The buying process is also much quicker and simpler. From the signature of the provisional sales agreement to that of the authentic deed and the installation in the premises, it takes an average of three months.

 

More accessible prices

The current “old” real estate market is characterized by a larger number of sellers. This situation therefore benefits future purchasers who have only the embarrassment of choice and very often the possibility of a substantial price negociation. A discount of 10,000 or 15,000 € on the displayed price is not uncommon. It makes it possible to fully cover notary fees or certain restoration works.

There is also nothing to prevent you from hoping for a substantial increase in value if you plan to sell the property in the next four to five years.

 

More works to be expected …

An old dwelling is bought “as it”, with its qualities and its vices.

The different mandatory diagnoses carried out by the former owner protect you in principle from the worst news (energy performance, termites, lead, asbestos …). Nevertheless, you should expect to face more unforeseen work and expenses in the future.

Even if you avoid the nasty surprises, keep in mind that an old house does not usually meet the 2012 thermal regulations. You will therefore consume more energy to heat your property unless you commit Important works.

 

Less favorable taxation

In the old housing programs, the transfer taxes levied by the local authorities and the State are important and we must not forget the notary fees, of the order of 7 to 8% of the total sale price.

Unlike the acquirer of a new asset, the owner of an old asset pays the property tax at the full rate as of the finalized transaction.

The choice is not an easy task but do not hesitate to contact us for assistance.


Cabinet Roche & Cie, Chartered Accountant in Lyon, France.
Specialist in non-residents’ real estate taxation.