I believe rents are lower here than in New york. There've been annual price increases of up to 10 percent in many arrondissements in the last four or five years. The record in the last 12 months, according to the Challenges article, was 20.6 percent in the 11th arrondissement! Obviously, this can't go on too long. On the upper end, prices are much higher than those averages. Anecdotally, I have a colleague who owned a nice 55-square-meter apartment in the 7th with a smallish terrace. He and his wife had been living in a larger rented apartment, which they had the opportunity to purchase. So they put their owned apartment on the market. The realtor said, let's list it at 480,000 euros -- a bit of a stretch, he said. It sold in two and a half hours.

As for purchasing and renting out, there's a two-track legal structure. The law around unfurnished rentals is extremely favorable to the tenant. Leases are for a minimum of three years, and many are for six years. The landlord is committed for the entire lease period. The tenant can terminate a lease at any time on three months' notice, or one month if a work-related move outside commuting distance is the motive for the move. Leases renew automatically. At the end of a lease period, apartments can only be reclaimed by the owner for his or her habitation or that of a family member. Elderly people have additional tenant rights. Evictions in cold weather are a no-no. It's extremely difficult to have a non-paying renter evicted. The legal process is costly and can take one or more years. Furnished rentals fall under a different set of laws that are considerably more favorable to the landlord, which is why more and more Paris rental apartments are offered furnished. However, recent legislation does mandate a minium lease period of one year for furnished rentals.

There you go. It's good to know that I wasn't really completely off base in terms of Paris apartment prices.

I guess Paris apartments seem deceptively cheap on the surface, but when you look at them closely, they're really not cheap at all. Still, Paris apartments seem to look "nicer" than NYC apartments -- maybe there's just that charm factor. I don't know.

Any ideas what's driving the boom in the Paris market? Supposedly low interest rates are driving the US market, but when I sat down and did my calculations I simply couldn't see how that could be the complete story.

I guess that's why I'm not rich. :-)

By the way, a (nice) starter apartment (i.e. studio) in Manhattan can easily rent for $1500 and up. But people in NYC seem to be able to snag some sort of deal or another. I've a friend who lives in Hell's Kitchen, an area that was practically a dump and a no man's land about ten years ago, and she pays around $1200-$1300 for a small one bedroom apartment. But her apartment is rent-stabilized.

Another friend lives in Willamsburg (in Brooklyn) for under $1000 in a railroad apartment, but he assures me that new tenants who've moved pay a couple of hundred more.

Would be interesting to hear how rents in Paris compare. My understanding is that there's also some sort of rent stabilization in Paris?

Which, I guess, brings me to the next question. At current housing prices, it seems like renting is cheaper (in terms of financing mortgage costs + maintenance in NYC). So if rents are cheaper in Paris (comparatively) and sale prices are relatively high, then what makes owning apartments attractive in Paris (compared to renting, say)?

Robespierre, I think you should send me over to scout it out for you.

..Paris rentals are a funny things as outlined..If you have an unfurnished in essence rent controlled appt, it can be quite a steal which makes some people think very carefully about buying. Sometimes people will buy a country place rather than buy an appt if they have a long standing rental. I have lived in France and it took me 2 years to learn the rules of the game but I never learned how to fully play the game! Thank goodness my partner was French and considerably older (with years of experience in the market).

The high end of the market is driven by non-French purchasers, though I doubt Americans are as present now, given the unfavorable exchange rate. The broader market is driven by very favorable interest rates, and loosening of French bank policy in regard to the length of loans. The Challenges article notes that the average now is 16-year loans at 4 percent, whereas in 1991 it was ann 11.5 year loan at an average 10 percent. The market also is driven by the difficulty of for a prospective renter of concluding a lease, since landlords are exceptionally cautious because of the legal context.

I think its aversion to "paper" investments that turns people here to real estate. Also, property taxes are a whole lot lower here than in the United States.

Dave, if there is a minimum of one year on leases for furnished apartments, how do all these short-term rental places work? What rules apply to those rentals, do you know?

Ken

Dave_In-Paris, isn't there some type of law in France regarding inheritance, that applies whether a person is a citizen of France or elsewhere.

Something about the property has to go to the deceased child or children rather then the deceaseds spouse?

I may be wrong or confused (it has happened on occassion) but it seems like I have read this more then once.

Ken,

Tiptoeing out on a limb: I believe vacation rentals (of appartments) fall under the category of "prestation des services," regulated separately. The critical difference, I imagine, is that the renter is not establishing his legal residence in a vacation apartment, and so does not require the kind of legal protection that a longer term renter of a furnished apartment does. You may sign a contract for a vacation rental but you won't sign a lease. Also, the one-year rule for leases of furnished apartments is brand new. No jurisprudence around it yet.

Your question is an interesting one, Ken, because fiscally there is no difference between a series of one week furnished rentals or a one-year furnished rental. They're all taxed as benefices industriels et commercials .(How many mistakes did I make in that phrase?)

LoveItaly

I believe that's correct, property in France would fall under French inheritance law, which does favor children. Usually, a surviving spouse has, at least, life use of the property. And a spouses rights can be strengthened through a legal act called a "donation entre epoux. Also, the legal structure of a marriage can be changed to alter the way an estate is handled -- though not to disinherit children. Aralynn and I, who have no children, were able to change our matrimonial "regime" under the terms of a U.S.-French treaty without going through court, delaying probate until we both have died. (One consequence is that our worldwide assets, such as they are, will be passed on, and taxed, in France. But these are complicated matters, and anyone contemplating a property purchase in France should seek legal and tax advice from professionals with a lot of international experience.

That should read, our worldwide assets, such as they are, will be probated and taxed in France

One way to get around the French inheritance laws, which require that property be passed on to children, siblings, parents, nieces and nephews, etc. (if I understand correctly) is to form a Société Civile Immobilière. Two unmarried people can, in other words, incorporate themselves and buy the property that way. The property is then subject to corporate laws, not family law. And the two unmarried people can live in the property rent-free, so there aren't any big tax issues. You still pay property tax and the taxe d'habitation...

But if I recall correctly, the société civile route involves paying a yearly sum of something like 5,000-10,000 euros. Right, ken?

Not knowing this -- but that fee is yearly? Hm....

Even at 5000 euros a year, this would be 50000 euros for ten years. And what if the couple lives on for a long time?

It's a princely sum....

I find this concept quite bizarre, actually. Isn't there a concept of a will in France? I mean, why can't you just leave your property to whomever you want (provided that you wrote all all this down with a lawyer)?

I suppose there are ways to sit down with your notaire and draft a way to get around the dreaded inheritance laws, but the process certainly can't be all that easy or cheap. I can't tell you how many French people I Know who had their parents' properties foisted on them through inheritance and who can barely afford to keep the places up.

Interesting. Then why don't they sell the place if they can't afford the upkeep?

What I would find more interesting is if the people who inherit can't afford to pay the inheritance tax -- persumably there's such a tax in France too -- as there is in the US.

Didn't this issue of inheritance come up in Moliere's "Misanthrope"? I vaguely remember this, but then I don't know if my memory is just failing as usual. (I know that's not the main topic of that play.)

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