Photo credit: KitLKat
Demand for ski property in the French Alps is climbing back up, according to new figures.
Brits account for over one-third of prime real estate purchasers in the French Alps, reveals Knight Frank's inaugural Ski Resort Property Index, but are finding they have to compete with more buyers from the eurozone as the ski resort market starts to recover from recession.
Indeed, European investors remained prominent throughout the 2010/2011 ski season because they were unaffected by the currency fluctuations. The result is a steadily increasing level of interest that has helped the market to stabilise and, in some cases, bounce back strongly.
Prices in the resort Megève, for example, recovered and jumped by 4.3 per cent in the year to June 2011, says Knight Frank.
"Whilst prices have not increased across the board (and markets are still very price sensitive) levels of activity (especially viewings) have increased in the prime alpine resorts," commented Liam Bailey, Head of Residential Research.
As the new ski season arrives, buyers remain cautious, but a limited supply of property is fuelling interest, says Niclas Dowlatshahi, Managing Director of Leapfrog Properties.
Speaking exclusively to TheMoveChannel.com, Niclas explains: "It is extremely difficult, almost impossible, to get new building permits in The Three Valleys, so prices remain stable and in fact keep on rising. Properties in these sought after locations have held up well throughout the financial because there simply is not enough to keep up with demand."
Indeed, a fire sale of discounted units at a resort in The Three Valleys was launched on TheMoveChannel.com last week, prompting an unexpected avalanche of enquiries.
Promising 7 to 10 per cent net returns for investors, it benefitted from being non-leaseback, Niclas suggests.
"Any new property being built is generally sold under the leaseback scheme, which despite all the problems with most of the management companies in France and the poor rental returns offered on the new developments being built, are still being bought up because buyers have no other choice if they want something new with the newest facilities.
"New properties without a leaseback scheme attached to them are extremely rare and so if available people should buy these if they ever become available as they will achieve the best capital growth and ultimately be easier to sell."
While many investors may be reluctant to part with cash during the current financial climate, the ski sector has nothing to fear from France's new austerity measures, argues Niclas.
"The French property taxes have put some people off but this is because of headlines that try to sensationalise everything rather than explain the hard facts. The fact is that although rates have increased most people won't be paying any tax anyway. If we take income tax on rental income, for example, it has increased to 34.5% in total but because you can offset 3% of the property price in amortisation each year (for furnished rentals under the BIC tax regime) plus all your mortgage interest and running costs and repairs, accountancy fees, property taxes, etc, most people won't end up paying any income tax anyway."
Overall, the Alps property market recovery still has some way to go, Niclas concludes, although the growing demand is helping it to thaw until mid-level buyers return:
"Like the rest of the market, it seems that the very cheap, discounted stuff is selling as is the luxury property but the middle-end market at non-discounted prices is quite quiet still. I would say the same is expected for the next few years."
Demand for property in the Alps is also starting to expand beyond the traditional seasonal months, adds Bailey. "Summer tourism, often involving hiking and climbing, has helped to increase rental incomes for many second home owners. The Alps are now host to a number of summer festivals, concerts and sporting events attracting visitors all year round."
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