Everything Cannes

1. Summary

Everything Cannes has created a simple, easy and effective buy-to-let investment opportunity in Cannes centre. The area of Cannes was chosen due to the enormous market for seasonal rental accommodation as well as high capital appreciation, thus making it ideal for high returns on investment. Everything Cannes will help the investor source and purchase properties in Cannes and then take care of the management and rental of the property

The great advantage of this buy-to-let is that unlike other overseas investment schemes, there is no restriction on when the owner can use the property, so you can make the most of a holiday home on the fabulous French Riviera while gaining all the benefits of a lucrative investment.

2. Everything Cannes

Everything Cannes is a fully registered and FNAIM-bonded French real estate agency specialising in the sale and rental of investment, residential and commercial property sales in Cannes and Nice as well as the rest of the C ôte d’Azur. Its directors are all from the UK and have in-depth knowledge of the French property market. They have many direct properties on their books and work with a large network of other professional French real estate agencies to provide their clients with a wide selection of properties from which to choose. Their agents will organise and coordinate visits, accompanying their clients around the various selected properties and negotiating on their behalf as well as giving advice on expected rental income.

The philosophy of Everything Cannes is clearly outlined by Judith Halmshaw (director) below:

‘We realise that buying a property in a foreign country can be a little daunting so what we offer is a free and complete package which includes everything from finding the property to setting up a telephone line, arranging direct debits and so on. We will take you step by step through the buying process and recommend good Notaries and financial advisors.’

3. The Market in the South of France: Cannes

3.1 The Market in the South of France

The French rate of inflation which is set by the European Central Bank is at a little over 2% and is set to remain low for the coming 12 months. According to Mortgage France, most French banks are lending at a rate of between 2.9 and 4 % depending on certain variables.

It is believed that the French property market has not yet peaked. A carefully chosen property in the right location can at the moment give investors a high return when considering the investor’s own equity and capital appreciation. So where would you see such returns?

The answer is the South of France.

The two most important factors that an investor should consider are the capital appreciation and the possible rental yield. The South of France is a perfect choice for exploiting both of these possibilities.

This area is a hugely popular tourist destination, especially amongst Europeans. Nice International Airport is France’s largest airport outside Paris and its second terminal has recently expanded to cater for the large number of low cost airlines such as Easy Jet and Ryan Air now operating in Nice.

The Côte d’Azur is less than a two hour flight from most European capitals such as Berlin, London & Moscow. You are guaranteed a mild climate in the winter and a wonderfully long, hot summer. Also compared to cities such as London, property prices are still relatively low.

High capital appreciation occurs in areas where there is high demand but low supply. The Côte d’Azur is the perfect scenario for this situation. Building land is limited as the French government has implemented stringent building restrictions to prevent overdevelopment. Many areas along the coast have been designated “green zones” which cannot be developed. Therefore the supply of building land for property is extremely limited, but the demand for property in this beautiful and highly desirable part of France is incredibly high.

The other important factor which has led to high capital appreciation is that the overall personal income of the foreign purchaser is a great deal higher than the personal income of the French resident purchaser. This has had a dual effect of further increasing the price value of property and also increasing the demand for rental accommodation amongst the French residents who are taking advantage of the high prices by selling their properties, releasing their capital and renting.

The South of France offers a huge seasonal rentals market. This covers the entire spectrum of properties from small studios in Nice to large villas and palaces in St Tropez.

In fact in 2002 there were over 68 000 000 overnight stays and over 5 billion euros spent by tourists on the Côte dAzur.

3.2 Cannes

Cannes is the segment of the French market with the highest demand for tourist/business rental accommodation and is highly likely to retain excellent capital appreciation.

Cannes is an extremely popular area amongst tourists. According to the INSEE (L’Institut National de la Statistique et des Etudes Economiques), over the past three years the average number of tourists visiting Cannes per annum is 9.4 million. At 22%, UK citizens make up the largest proportion of visitors.

Unlike most other towns along the coast, Cannes is less exposed to fluctuations in tourist numbers due to the many conferences and congresses that are held throughout the year. The most famous of these is of course the Cannes film festival; others include MIPIM which focuses on commercial property and the ILTM - the International Luxury Travel Market. In total 27 events and conferences are held in Cannes throughout the year; one in every five visitors to the Riviera is a business man or woman who stays for an average of five nights. Cannes therefore not only attracts the ordinary tourist but also business men and women who have higher expenditures than the average. The rise in the prices of real estate in Cannes over the past three years has been significant. According to the FNAIM - a body which regulates, insures and advises French real estate agents - the increase reached as much as 22% in 2003- this is compared to 12.1% in 2002 and 14.2% in 2001.

The town has recently adopted into their budget the ‘Plan Vert’ which means that more than 10 000 000€ will be injected into ‘beautifying’ several of the principal roads. Hence it is evident that property in his area this will continue to appreciate at a high rate.

4.1 Where you should buy

In order to see maximum returns on investment, Everything Cannes advises the purchase of a studio, one bedroom or two bedroom apartment in the centre of Cannes in the area know as “La Banane”, (the Southern half of Cannes so called because of its shape). The Number One location is the Croisette but prices here are very expensive and you can expect to pay anything between 5000€ and 15000€ per m². The most prestigious parts of the Croisette are the areas where the famous hotels are situated such as the Carlton, The Majestic and the Noga Hilton as well as the famous Palais des Festivals which is soon to be renovated.

The Rue d’ Antibes and the side roads running off the Rue d’Antibes going towards the sea are excellent for rental and are significantly cheaper. However in order to see good rental yields, investors should buy apartments in close proximity to the ‘Palais des Festivals’. Other features such as a lift, a balcony, sea view, concièrge as well as the furnishings and overall condition will also increase an apartment’s rental valu e. The expected rental yields for apartments in this area are as follows:

4.2 The expected revenue for the congresses & other periods

Gross Returns on Investment per Annum

STUDIO COSTING 150 000€ = 7.78% pa
STUDIO COSTING 200 000€ = 5.84% pa
ONE BED COSTING 230,000€ = 7.19% pa
ONE BED COSTING 300,000€ = 5.51% pa
TWO BED COSTING 350,000€ = 7.14% pa
TWO BED COSTING 400,000€ = 6.25% pa

pa = Per annum

Please note the percentages quoted above are gross and based on purchase price only they do not include other standard charges, solicitor’ fees, mortgage interest, bills, maintenance etc.

4.3 The price of property

The price of property in this area can vary due to differing factors which are outlined above. The Number One location is the Croisette but prices here are very expensive and you can expect to pay anything between 5000€ and 15000€ per m². However on average you can expect to pay the following for a good rental investment in the most desirable areas for which you are most likely to see the returns quoted above:

Studio (approx 35m²): from 150 to 250 000€
1 Bedroom (approx 40m²): from 230 to 350 000€
2 Bedroom (approx 60m²): from 350 to 450 000€

4.4 The best return on Investment

The best return on investment would be for a 2 bedroom apartment in the “Banane” area. High returns can be expected on investor’s own equity with the cost of borrowing at 4% and even taking into account a lower-than-expected capital appreciation of 6% pa (note that 2 bedroom apartments increased by 22% last year according to the FNAIM).

Example of Return on Investment for a two bedroom apartment :

NB The property will be subject to capital gains tax and any income generated from the property will be subject to French income tax. Depending on the income generated different rates will apply. It will have to be assessed on a case by case basis. Please see section 4.6 for more detail.

NB The expenses above are estimates, we have tried to be as precise as possible however they will vary depending on the property

4.5 Taxation Issues

The tax foncière and tax d’habitation have been taken into account in the above ROI table:

Tax Foncière
This is a tax paid by the owner of the property. The charge is based on the notional rental value, the cadastral value, which is assessed by the local authority at the 1 st of January each year.

Properties which have just been built or have been substantially renovated are usually exempt for two years from the 1 st of January following completion of works.

Taxe d’ Habitation
This tax is paid by the occupier of the property and is probably the nearest equivalent to council tax.

Taxe d’ habitation is also assessed using the cadastral value. The property has to be habitable. If it can’t be occupied because for example it is being renovated, it may be exempt for that period.

If you are the owner, and are deemed to be in occupation, i.e. the property is not rented out long term, then you are liable to pay this tax, even if you are not staying in the apartment.

Income Tax
Income tax depends on many variables. However in this case so long as the gross turnover does not exceed 76 300€, then the property falls into a tax regime known as the ‘micro enterprise’.

The basic formula is this:

X – 72% = Tax Base

( X = gross rental yield)

If the tax base is less than 8106€ then

Tax Base X 25/100 = amount of tax to be paid

So for a one bedroom with a turnover of 22900€ gross the tax that would have to be paid would be

22900 - 72% = 6412€

6412€ is below the 8106€ imposable tax platform.

Thus the tax levied would be :

6412 X 25/100 = 1603€ per annum

If the tax bas is more than 8106€ then use the same formula. However you will have an additional tax to pay which will be calculated according to the French tax scale this depends on your family situation.

The micro enterprise is based on the assumption that you are not a professional in the property trade in France and because you are not domiciled in France there is a minimum taxation of 25% of the Tax Base.

Other taxes which must be taken into consideration are inheritance tax, wealth tax and capital gains tax. These must be assessed on a case by case basis and we advise that you seek advice from a qualified tax advisor. We can however provide you with a general summary sheet of these taxes as well as contact details of specialist financial advisors upon request.

Everything Cannes will source a selection of the best investment apartments in Cannes.

The investor can then choose which ones are of interest and if he/she so wishes can come and view the apartments for themselves. At this point if the investor wishes to have exact estimates of the renovation and furnishings this can be organised immediately. The investor should also seek advice about the inheritance and taxation laws which will come into effect once they have purchased the property and the property is generating income. Everything Cannes will recommend financial advisors who specialise in the various related issues.

Once the investor has considered all of the above and has made a decision on which apartment or apartments he/she wants to purchase an offer is made. Everything Cannes will then forward this to the vendor and if necessary negotiate on behalf of the buyer. Once a price has been agreed a preliminary contract or what is known as a ‘compromis de vente’ must be signed by both parties. The buyer then has a seven day cooling-off period in which he/she could retract their offer without reason and without any penalty, by means of a recorded letter to Everything Cannes. After the seven day cooling- off period the contract become binding to both parties. The final exchange normally takes place two months after the signature of this contract. Everything Cannes can be given the power of attorney if so required

Once the apartment enters into the investor’s possession, Everything Cannes will then handle the management and marketing of the apartment

Once the apartment enters into the investor’s possession, Everything Cannes will then handle the management and marketing of the apartment.

‘ Your single point of contact for a hassle-free French property investment’

6.1. Management

Please request our management brochure for full information of this service.

In brief Everything Cannes management will take care of the following:

Administrative needs:
Help you with the administration that is related to your apartment.

Banking & Insurance:
Help you open and bank account and recommend insurance brokers.

Regular security visits and reports:
Provide monthly rent-rolls, balance sheets, expected future income, maintenance reports, annual budgets, security issues ….

Technical problems:
Help resolve problems with phone lines, internet, electricity …..

Key holding for hassle free co-cordination:
EVERYTHING CANNES MANAGEMENT will be your main key holder and will co-ordinate all rentals whether this is via other agencies or for clients whom you send to us directly. This will help avoid double bookings. Your apartment being rented out without your knowledge. You having to deal with phone calls or mails from different agencies and clients. Falling standards of your apartment .Confusion about booking dates

It will help though in Co-ordinating all bookings so you don’t have to deal with phone calls or mails from different agencies and clients. To ensure standards are maintained in your property. To liaise with the staff i.e. cleaners, cooks, gardeners, etc.

Emergencies:
Provide support and help for any serious emergencies that relate to the property.

6.2. Letting

Our wish is for you to get maximum investment returns from your property with the least amount of hassle for you. Therefore if you subscribe to our professional management contract we will market your apartment not only to our own clients but also to other local and international agencies so that your property gets the maximum exposure possible-and therefore maximum bookings.

We will select reputable rentals agencies and accompany them on visits to your property and explain the rates that you require and update them on bookings already made. We understand that our clients do not wish to receive numerous phone calls per week from several different agencies trying to organise bookings, so we at Everything Cannes MANAGEMENT will be the central contact point for all agencies as well as for your own personal clients.

For all sales enquiries please contact Everything Cannes on:

info@everythingcannes.com

www.everythingcannes.com

Address : 29 Bvd de La Ferrage, 06400 Cannes.

Member of the FNAIM