Britons who own a French holiday home have had to weather a much gentler downturn than in Spain – and house prices may now be on the up

The heady days of buying holiday homes abroad using equity from soaring house values in Britain have long gone, yet France remains a favourite for the few still buying overseas.

No authoritative data exists on international holiday home sales but websites such as Primelocation and FindaProperty say listings for classic French cottages and renovation projects receive heavy numbers of hits, despite the economic malaise.

Britons typically buy near airports served by budget airlines, in four main regions – the south west, from Normandy down to the Spanish border; the Mediterranean coast, along the Cote d’Azur and provence and into Languedoc; the Alps; and a smaller number of generally wealthier purchasers look to Paris.

Britons who choose France for a holiday home are typically better off than those who buy in Spain and have had to weather a much gentler downturn. Price falls of 10% to 15% have been common over the past five years but many owners – such as Andrew and Jill Ness, accountants from Birmingham – have easily recouped that by improving their homes.

“We bought a bergerie, a country house about 30 minutes from Bordeaux. It was only €108,000 (then about £73,450) back in 2005 because it needed structural work and rewiring,” says Jill. “The villagers were helpful and welcoming and recommended workmen. The hard part was supervising and controlling costs.

“It sounds contradictory but the rate of work would slow, yet the scope of the project would expand, because we weren’t there, day to day, to see what was happening,” says Jill.

The couple spent €55,000 but have now had the home valued at €240,000, giving them a profit of well over £80,000. But other British buyers, hoping to fund their purchase with lucrative rental income, have been less successful.

Richard Dale, a Briton who moved to run an estate agency in western France in 2003, writes about his own gîtes rental business on blog.rhf-international.com.

He says: “In 1998 in Charente-Maritime there were just a handful of complexes — three or more gîtes on a single site, typically sharing a pool. Now there are literally dozens, with seemingly yet another opening each month. Some complexes have 20 or more. The number of tourists has risen, but nothing like as quick as the amount of accommodation.”

Lanisha Butterfield of travel website HolidayLettings.co.uk, which advertises more than 5,500 French holiday homes, says: “If there are 20 gîtes in an area an owner needs to make theirs stand out. It can be very tough.”

Rental income is modest even for those who do find takers. Butterfield says many owners have been running discounted offers for summer 2011 since the autumn, and tourists can easily find that hiring a cottage for a week in France in high season can be cheaper – even including ferry costs – than a comparable property in Cornwall.

As a result of the vast over-supply of holiday homes, Britons looking to buy are more discerning. Graham Downie, who runs Cognac Property in western France, says: “In the area around Cognac I’ve seen a move away from the seemingly obligatory gîte complex. Most of my searches now are either for family homes in good condition, with views over the vineyards, priced between €250,000 (£217,418) and €400,000 (£347,767), or for townhouses with a small garden or courtyard between €200,000 (£173,883) and €300,000 (£260,825).”

The biggest victims of the French downturn, however, may be those who bought new-build. Figures from estate agency Humbert show that prices of some in Champagne-Ardenne fell by more than 20% in 2009 and have not yet recovered from that slump. “Even in the prime locations, asking prices [for new homes] have fallen back by between 10% and 20% since pre-recession levels,” says a report from the agency.

Few buyers have had to cut their losses, however. Estate agents say there has been no discernible rise in “distressed sales”. Instead, some believe canny Britons, who bought when sterling was strong, are waiting to see if the exchange rate shifts further in favour of the euro – in which case a quick sale could see them net a good profit.

Signs of le recovery

After years of gentle decline and sometimes sharp falls, the French housing market appears to be picking up.

“Interest from international buyers dropped substantially at the end of 2008 but transaction numbers are rising once more,” says Graham Downie.

The Fédération National de l’immobilier, the French estate agents’ body, says average prices of all homes rose 6% in 2010 and property purchases exceeded 700,000 – a 15% rise on 2009. “Prices, after having fallen quite significantly – approximately 10% if we look at the end of 2009 – have regained a certain strength,” says FNAIM president René Pallincourt.

The average price of a home in Burgundy is now €148,400 (£129,000), while in Languedoc the figure is €208,800 (£182,000) rising to €384,200 (£334,000) in Provence. The federation and lenders, such as Credit Agricole, predict rises of about 3% this year, with larger increases in cities.

It is a hard slog for British purchasers. “The days when homeowners released equity from their UK properties to pay for a dream house in Provence are a distant memory,” says John Busby of Athena Mortgages. He says more Britons who cannot afford to buy outright are seeking French mortgages, which require deposits of between 10% and 30%. Borrowing in euros avoids exchange rate complications and may be cheaper to pay off if sterling eventually rallies. But Busby warns there is a possible hitch. “French mortgages work on the basis that the total of all [payments on] mortgages and loans held by the borrower do not exceed one-third of their income. This means monthly repayments on a UK mortgage will be taken into consideration.”