According to a recent study by French newspaper Le Figaro, last month's black Monday is likely to push even more French households towards property, either now or once the stock market has stabilised. Least affected share holders are set to liquidate their portfolio and re-invest in bricks and mortar instead – as has already been the case last year following the 'Dotcom' crash.

Last year French property agents VEF predicted that the market would become increasingly refined and at a time where security prevails, the preferred locations for property investment are city centres, business parks and the niche luxury property market. These options are often a safer bet than rural areas and small towns, which see less demand from the domestic French property market due to their more volatile appreciation and rental and resale potential.

Rental returns for French buy-to-let property is likely to settle at around 4 to 4.5 per cent per annum this year and this percentage could decrease further due to the growing gap between property prices (linked to increasing market demands) and rental rates (linked to slow household wages' increase).

This is good news for the established leaseback market which continues to offer guaranteed yields above 5.5 per cent per annum although VEF advise to beware of 'over-promising' promoters who could lure French property investors with unrealistic yields which will eventually have to be lowered.

Search for property in France

Read the latest French Property Bulletin FREE

Article first published 6 February 2008