House Hunter: Paris

The problem

The problem

GARETH DWIGHT OF LONDON WRITES: It may be an unpatriotic prediction, but I expect that Paris will be awarded the 2012 Olympics when the decision is revealed next month. It's my favourite city, I visit at least twice a year and I am set to come into a sum of money this summer - so if the Olympics go to Paris, I will too, to buy an apartment.

I have studied estate agents' windows in France, and their internet sites, so I know property is very expensive. But I'd appreciate a steer on good areas, the types of property that rent well - I cannot afford to keep a flat empty just for my visits - and how much I will have to pay for stamp duty, legal fees, surveys and the transaction costs.

I would like to use the apartment myself for at least two one-month periods each year, so I would like to avoid a long-term tenant. Are there short-term tenants who will pay promptly, vacate the property when they should and keep the interior in good condition?

Finally, in just under 10 years I plan to retire so will then either sell the property and try to use any capital appreciation to help my pension, or perhaps even live in it for some years. Are these feasible options?

The advice

GRAHAM NORWOOD WRITES: The Paris property market is one of the hottest in Europe, thanks to international buyers and cheaper mortgages. The average price of a flat is now £280,000. But the culture of buying and selling is different.

Apartments are marketed by the number of rooms, not bedrooms, and prices are determined by location, size and floorspace. Anything inside "le Peripherique", the inner ring road, is defined as central Paris, and attracts a premium.

The 1st arrondissement is the tourist zone closest to the Olympic action - if it happens in the city - but the most fashionable and oldest neighbourhoods for buyers include the 3rd and 4th which form the Marais. The 17th-century mansions have been split into flats, and some quarters have become mostly Jewish, others gay and alternative. The 5th is the Latin Quarter, while the 6th, St Germaine, is becoming heavily gentrified and expensive.

The 11th, 12th and 13th are historic residential areas near the Bastille, the Bois de Vincennes and Chinatown, respectively. The 16th is a wealthy area dominated by the Bois de Boulogne and the 17th is also pricey and sits close to the Arc de Triomphe and more Olympic sports events.

Almost all apartments rent well and many agents specialise in corporate tenants who want one- to six-month tenancies, or well-heeled visitors who want a holiday flat for a month. Arranging your own time in your flat will not be difficult.

When you buy in Paris you will have to pay up to 10 per cent for the notaire, agents and other local fees. There is also a land tax, a tax levied by the city, and a wealth tax if your property is worth over €720,000.

Capital gains tax is payable if you sell at a profit, although you can offset against it many of your renovation and extension costs. From the sixth year of ownership onwards, the CGT liability is reduced by 10 per cent annually so if you do sell when you retire - in say 10 years from now - you may be eligible for only half of the CGT.

The solution

Property one: Studio flat on Boulevard Haussman, Paris 8.

Price: From €305,000.

Agent's details: Behind the 19th-century Parisian architecture typical of the St Philippe du Roule district is a 21st-century renovated block of flats, so even the studio apartments come with air-conditioning.

Agent: Pierre & Vacances Conseil Immobilier (0033 800 001 5551).

Property two: Apartment on Rue Bixio, Paris 7, close to Les Invalides.

Price: €530,000.

Agent's details: This one-bedroom flat is on the sixth floor of a 1930s building. The apartment has 60sqm of floorspace and has recently been renovated.

Agent: Knight Frank Paris (0033 01 4316 8885).

Property three: Apartment on Rue du Boccador, Paris 7.

Price: €498,000

Agent's details: A two-bedroom flat with 72sqm of floorspace on the fourth floor. The property is in the process of being renovated. The block has a resident caretaker and a cellar.

Agent: Knight Frank Paris (0033 01 4316 8885).

Fact file

Europe's most romantic city is not cheap. House prices in Paris rose by about 13 per cent last year, and are now twice the level seen in 1997 when the boom began. As a result, 20 per cent of the city's housing stock is privately rented, mainly by those priced out of the sales market.

There is no sign of a slowdown and the Bank of France has warned that this surge could produce a crash in the property market similar to Britain in the early 1990s. This is particularly relevant with regard to apartments in Paris, which have seen the biggest increases and where one in five new home owners is a foreign buyer.

Although many analysts have put the price rises down to the influx of foreign investors, domestic buyers are also taking advantage of low interest rates and an easing of lenders' mortgage terms to move from the rental market into private ownership.

The National Federation of Estate Agents estimates that prices have increased by 87 per cent across France in the last six years. Philippe Malaquin, a chartered surveyor who lives in Paris says: "The centre of Paris now has millions of inhabitants and there are not many flats to sell - both factors pushing up property prices."