Property investors and homebuyers looking to enter the French property market have recently received a major boost with the announcement that French lenders are now offering higher loan-to-value mortgages to UK and Irish residents without some of the tighter restrictions previously enforced.

In a traditionally strict system for overseas purchasers looking to invest in the French property market, the maximum loan-to-value (LTV) ratio typically offered by French lenders until now has been between 80 and 85 per cent.

However, research by Assetz Finance has revealed that lenders will now offer up to 90 per cent LTV to UK and Irish buyers on holiday homes, seasonal rental and French leaseback property, requiring investors to put in a deposit of just 10 per cent.

This increased lending could provide a significant incentive for UK and Irish investors looking to jump in to the French property market, with lower deposits resulting in higher gearing and magnifying real returns on cash invested.

Katy Hepworth, Overseas Mortgage Manager for Assetz Finance, commented: "This is a long-awaited improvement in French borrowing for property investors, and with rates currently starting at 4.45 per cent and mortgage terms of up to 30 years available, these 90 per cent LTV mortgages are extremely affordable".

She continued: "The breakthrough in finance available through French lenders has positive implications for capital growth in the French property market as a whole. With lower deposits now making the market more accessible than ever, we expect to see an increased demand for French property from UK and Irish buyers, which is likely to help boost property values further in key areas."

However, although overseas interest in French property continues unabated, domestic interest is beginning to wane. According to a VEF French property market report released this month, the reasons for this will be familiar to would-be first-time buyers in the UK: "Much of the slowdown in the property market experienced by French agents has been led by the inability of many first-time buyers to be able to raise sufficiently large mortgages… Although this is gradually changing, the impact of financial restrictions placed on French property buyers looking for funds has been strongly felt in a market that has experienced higher than average price increases over the past ten years."

In an effort to kickstart the domestic French property market, President Sarkozy is proposing to takes a 'Thatcherite' approach to encouraging more home ownership by selling off 40,000 'council' homes and offering tax breaks of around five billion euros to aid buyers and encourage them to take a far greater interest in home ownership.

As well as sparking domestic interest, such changes could also represent investment opportunities for overseas property buyers. Julien Lu, Regional Director for Imoinvest, commented: "For the property investor there are some very good French 'hot spots' to be considered, particularly now that the President is looking to have a marked effect on the market. Those investing in French property in those areas could see substantial gains."

For those looking to capitalise on any such opportunities in the French property market, Lu suggests that Residence de la Tour de Mare (pictured) in Frejus, just outside Cannes, would be a good bet.

"The location of ths French property development is perfect; only three kilometres from the medieval city centre and five kilometres from the sea. The area abounds with sporting facilities, culture and history. This guaranteed buy-to-let leaseback residence offers heated swimming pool, sauna and fitness centre, all set within enclosed landscaped gardens. Many of the apartments offer either balcony or terrace. This is an opportunity to secure rental income for the life of the commercial lease and tenant occupancy, as it is serviced by one of the leading French management companies."

Prices at Residence de la Tour de Mare start from £62,325 for a studio apartment, rising to £152,437 and above for two-bedroom apartments.

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French property to inherit a fillip?
The Sarkozy solution: A British view of France

Article first published 28 June 2007