Midi Property | French Property Consultants

Pierre et Vacances is Europe 's leading leaseback provider, which has recently acquired the European Center Parcs brand. Pierre et Vacances are a "Blue Chip" company who are listed on the French Stock exchange, in the equivalent section to the FTSE 100. The company was established in 1967, and now manages over 58,000 properties internationally on behalf of its leaseback investors.

An excellent way to invest in property in France is through buying a leaseback property, which benefits from a government-backed VAT-refund incentive, designed to encourage investment in tourist residences. Through freehold ownership of an apartment or cottage that is leased back to a management company for a minimum period of 9 years, investors benefit from guaranteed annual returns from their fully managed and maintained property with relatively low up-front costs and no ongoing maintenance or running charges.

A freehold, fully furnished property
Investor entitled to reclaim the 11-19.6% VAT over a 20 year period
Property leased to management company for minimum 9 year period, with automatic renewal for a further 9 year period
Investors receive an index-linked, guaranteed annual return usually starting at 4.5% of the purchase price, depending on personal usage
No running charges or maintenance costs

Investors buy the freehold of a property outright but lease it back to a management company who specialise in the tourist management, maintenance and rental of these properties for a minimum 9-year period. In return owners receive a guaranteed annual return, irrespective of occupancy of the property, NET of all communal charges, maintenance and running costs.

Pierre & Vacances are unique because they both develop and manage their own properties. With over 250 residences in 6 European countries, Pierre et Vacances cater for 6.6 million clients annually. The groups astounding success in the tourism sector, is a result of the quality of construction, location and management of the properties.

In the late 1960s, as a result of the large number of tourists visiting France , the French government recognised the need to encourage investment in tourist residences. This recognition resulted in a government backed VAT refund on the purchase price of properties built for leaseback purposes.

Pierre & Vacances pioneered this leaseback concept, with the creation of the first car-free ski resort in Avoriaz in 1967.

The French government will refund the VAT (11-19.6%) to investors on purchases of leaseback properties over a 20-year period, which represents a significant saving on the purchase price of a property. The difference in the VAT amount refunded depends on whether the property is a new build (entitled to a 19.6% rebate in France ) or a refurbished property (varying between 11-14% in France ).

Instead of investors having to reclaim the VAT from the government annually, over a 20-year period, Pierre & Vacances pre-finance the VAT amount in advance. Should owners elect to sell their property within this 20 year period, they would then owe the French tax authorities the proportionate amount of VAT remaining on a “pro rata temporis” basis. The second buyer of a property is also able to reclaim any outstanding portion of unclaimed VAT.

Investors are guaranteed an annual return, usually starting at 4.5% of the purchase price of the property, which is then index-linked to the Cost of Construction Index. The return is provided irrespective of tourist occupancy, which protects investors from fluctuations in tourist demand or downturns in the property market.

Pierre & Vacances will be completely responsible for the management of your property, meaning you will not need to worry about general maintenance, repairs or the upkeep costs of the property and its communal areas. Pierre et Vacances are also responsible for finding rental tenants throughout the whole lease period, the success of which does not effect your income.

Pierre & Vacances will maintain your property to a very high standard throughout the lease, with the property being completely refurbished after the first 9-year period. This is especially important to P&V because the excellent presentation and high quality of their properties guarantees their success in the tourism sector.

Companies selling leaseback properties guarantee their investors an annual return. These guarantees are secured by the financial strength of the company, combined with its ability to successfully manage, maintain and rent the property despite market conditions during the lease period.

Pierre & Vacances has successfully provided its investors with guaranteed returns for over 37 years, and with 58,000 owners and 6.6 million tourist clients, P&V is Europe 's market leader in the development and management of tourist residences. The success of the company is reflected by its position on the French stock market, with its listing in the equivalent to the UK 's FTSE100.

In January 2004, in response to investor demand, Pierre & Vacances adapted its strategy to guarantee the automatic renewal of all 9-year leases for a second 9-year period, thus guaranteeing index-linked rental returns for an 18-year period. This has increased the stability and long-term security of returns for investors.

The typical mortgage length of 15-20 years.
The exemption from French Capital Gains Tax after 15 years of property ownership.
The full VAT saving, achieved after 20 years of ownership.

In recent years many European countries, France included, have experienced impressive capital growth. For example the average annual house price increase in France last year was an impressive 17-18%. However, it is important to remember capital growth cannot be guaranteed with any property, leaseback or not and past performance is no guide to the future. The major advantage of this product is the guaranteed income, which is not the case with 'conventional' property investment. This guaranteed income provides an 'underpin' to the property value as any asset with a guaranteed income must have a consequent capital value, which will vary depending on interest rates generally. There is no other investment, which can provide this kind of reassurance.

All annual returns are linked to the French Cost of Construction Index ( http://www.insee.fr/en/indicateur/indic_constr/indic_constr.asp ), meaning returns will continue to increase in line with this index. This increase has averaged around 2% over the last ten-year period.

Non-resident owners of French property are liable to income tax at 25%, however French tax rules allow investors to offset this liability against several factors including French mortgage interest repayments, notary fees and depreciation of the property. (*Please seek independent advice for verification)

Investors have the option to choose a leaseback formula that includes personal usage of their property, which can be used at their own discretion.

In addition, all owners have the option to use a discount of 15-25% on a large number of P&V properties in their winter and summer catalogues.

Subject to some income level criteria, a French bank will normally lend up to 80% of the purchase price of the property and interest rates are currently more favourable than in the UK . ( as of July 2005). However, we have also now secured a source that can lend 100% of the purchase price , plus Notary fees and who can offer schemes with rates starting at 2.50% . If you would like further details of leaseback property mortgages, free of charge and with no obligation, we can get these sent directly to you, please click here.

Statutory Warning

Currency exchange rate movements may increase the sterling equivalent of your liability under a foreign currency mortgage. Your home is at risk of repossession if you do not keep up repayments on a mortgage or other loan secured on it.

These are freehold properties and as such are subject to the same market forces as any other property (or indeed asset) you might buy. The difference between a P&V property and a buy to let or overseas property is that in the latter case, once the property is yours the company or person you bought it from has no interest in it whatsoever. P&V on the other hand, has a vested interest in maintaining both your property and the development as it makes most of its money from letting properties. It has established its reputation since 1967 as Europe 's leading provider of self-catering holiday accommodation. As such, 6.6 million holidaymakers will stay in P&V properties every year. This gives you a guaranteed potential supply of purchasers as P&V has a well-established resale division, which will market your property to those holidaymakers. Traditionally, most buyers have been happy customers of P&V and have stayed at the resort where they decide to buy. Out of P&V's approximately 58,000 properties, there are currently less than 150 properties for resale.