Guadeloupe: a paradise subsidized by France
Last Updated: August 25, 2015
Attractions include lush rain forests, dramatic volcano, spectacular cascading waterfalls, crystal clear turquoise waters, charming villages, and French-Caribbean influenced culture and exquisite cuisine.
Real estate in Guadeloupe remains a bargain, compared to other Caribbean states. At the Pointe des Chateaux peninsula, on the eastern side, prices of three-bedroom oceanfront houses in upscale residential neighbourhoods start at US$540,000.
In Malendure and its neighboring Bouillante on the Basse-Terre’s West Coast, homebuyers can buy inland houses of about 1,100 square feet (sq. ft.) for just US$71,000. A similar house located on the coast is priced at US$121,500.
In the main resort towns of Saint-François, Saint-Anne and Gosier, all in southern Guadeloupe, the average price of 340 sq. ft. studios is US$47,000. On the other hand, much larger one-bedroom apartments and condominiums at the Marina are priced from US$84,500 to US$137,000.
As in France, there are no restrictions on foreign ownership of properties in Guadeloupe.
Rental incomes in Guadeloupe - rental yields range from 4.94% to 5.59%
Apartments in Guadeloupe earn what we term ‘moderate’ rental yields with a narrow range of from 4.49% to 5.59%.
Smaller apartments are the most expensive and the most profitable. A 40-sq m apartment sells for about US$4,100 per square metre, and earns rental yields of around 5.59%.
Bigger apartments are more affordable, as 120 sq. m. apartments sell for about US$3,000 per sq.m.; but they are also slightly less profitable in terms of rental returns, earning 4.94% in rental yields.
Rental income tax is surprising low in Guadeloupe
Guadeloupe’s tax system exactly mirrors that of France.
Rental Income: Rental income earned by nonresidents is taxed at a flat rate of 20%. Distinction between furnished lettings and unfurnished lettings is important because it has implications for taxation, primarily for deductions allowed.
Capital Gains: EU residents and residents of France now pay 16% on the net gain, after inflation relief, and after deduction of acquisition and improvement costs. Nonresidents of an EU country pay CGT at a rate of 33.3%, subject to any applicable double tax treaty.
Inheritance: French private international law uses the standard double rule on inheritance: the law of the deceased’s domicile applies to moveable assets, and the law of the location of the property applies to immoveable assets.
Residents: French residents are taxed on their global income at progressive rates from 5.5% to 40%.
Transaction costs range from
high to very high in Guadeloupe
Round-trip transaction costs in Guadeloupe, as in France, are high. Total costs for old properties (more than 5 years) can range from 16% to 27%. New properties without previous sales have the highest costs at 27.6% to 44% because of the 15.4% VAT. Notary fees for old properties are fixed at 8%, but range from 2% to 5% for new ones.
Guadeloupe's laws are pro-tenant, as in France
Guadeloupe follows French tenancy law, which is very pro-tenant.
Rent: Though the initial rent can be freely agreed, the rent can only be revised once a year, and not more than the increase in the (new) INSEE rental index. In combination with a highly restrictive contract structure, this means that rentals of old apartments have tended to drag well behind new rentals and prices.
Tenant Security: An unfurnished property contract has, as a minimum, a three-year term, though furnished property contracts may be for one year. In both cases, even when the contract ends, the owner can only recover the property if he or a family member intends to live there, or he intends to sell. In addition, eviction through the legal system takes a long time.
Social unrest lead to cheaper propertiesThe populations of Guadeloupe and Martinique are not much different, but Guadeloupe has 50% more land mass.
“The perception of difficulties is higher than in Martinique,” says Douglas Rapier of Atout Immobilier. “Guadeloupe has had more independence movement. They are more cognizant of the history of slavery, so social unrest is higher.”
High unemployment is a long-standing problem in Guadeloupe, currently standing at 25.8%, the fifth highest in the world, according to the International Labour Organization (ILO). This leads to political and inter-racial tension.
Almost all local housing built in the DOMs is subsidized under the Loi Girardin, which allows 40% of a DOM-located property purchase cost to be written off against future tax payments (the parallel incentive in metropolitan France is the Loi De Robien). Such incentives have spurred an entire industry of financial consultants advising on ‘defiscalisation’.
The economy is dependent on tourism and agriculture. In addition, Guadeloupe relies very substantially on French subsidies.