2 long term property investments – “Vente a terme” and Viager
29th November 2019 < back to archive
In France, as in certain other European countries, there are 2 types of property sales that offer unique advantages to both the buyer and the seller, the “Vente a terme” and the Viager.
Extra cash during retirement - For the seller, both these are like Equity release, and allows the seller to recoup in the form of a lump sum + monthly payments the value of his property. In the case of a “Vente a terme”, the seller agrees to vacate the property after a fixed term of 5 or 10 years usually, whereas in the Viager he can stay in the property until he dies.
Getting a home at a bargain price - For the buyer, both these types of sales allow him to buy properties at a reduced price, as the estimated rental for the period the seller occupies the property is deducted from the sale price. So if the buyer is 50 and wants a retirement home in the South of France when he is 65, he could buy a 500K Euro property for just 250K, by buying a property from a 75 year old lady who would have in France a life expectancy of 15 years. There is an element of risk that works both ways, and if the seller lives just 5 years the buyer will effectively acquire the property for 125K, but if the seller lives to over 95, the buyer will need to wait longer and continue paying instalments, although it would be very unlikely he would pay more than the original market price.
Reducing the risk - Buyers generally prefer a “Vente a terme” which fixes the duration to reduce the risk. For a 10 year wait a buyer can get one third reduction in the price of the property for the buyer. The other main advantage for the buyer is this type purchase enables him to buy without the need to get a bank loan, as the seller is providing him credit. So, for a property valued at 500K, it could be bought for 100K cash plus 2K/month over 10 years. This is very useful for foreign nationals that don't have easy access to French mortgages, like buyers from the US or Asia. At the moment only 0.5% of sales in France are carried out in this manner, but in future as pensions get lower and the need for equity release increases, these types of sales are expected to rise.
Other variations - Another possibility is for the buyer to occupy fully or partly the property, removing the long waiting period. To understand these options, Smartfinder Home will be pleased to advise and help you find these investment opportunities.