THE viager system of selling a home while continuing to live in it until death could get a new lease of life with extra guarantees from the government that could benefit both the buyer and the seller.
The French state finance body the Caisse des Dépôts is planning to move into the market to reduce the risk for buyers and provide guaranteed pension supplements for sellers.
Viager is a way of raising money against the value of a home (see bottom).
Similar schemes, such as equity release, generally see the owner borrowing money from a finance house against the value of the property to be repaid on death or when they go into care.
In viager, the transaction is between individuals, not finance houses, and the property is sold at a reduced price, with the buyer paying a monthly sum until the vendor dies.
The Caisse des Dépôts is looking at the market because France has an ageing population with 13million people between 60 and 85 years old and 70% of them having a pension of €1,200 a month or less. At the same time, 80%
of over-60s own at least one property.
Their problem was described by the president of the oversight committee of the Caisse des Dépôts, Henri Emmanuelli, as “having a pension but it is called their property”.
A 2010 survey found there were nearly three times as many viager sellers potential buyers with, at most, 5,000 sales each year – compared to an average 700,000 general property sales.
The Caisse des Dépôts, called the “safest bank in the world”, would enter the market as a third party, using its guaranteed funds to buy property.
Both sides should benefit; with the owner getting a lump sum – called the bouquet – and extra income each month and the Caisse des Dépôts – called the débirentier – getting a property that has been maintained and lived in and that can be sold at a potential gain on the vendor’s death.
Sellers currently often have to wait up to three years to find a buyer.
Eric Guillaume, of finance brokers Koesion, which backed the 2010 survey, said: “If you want to sell in viager at 65-70 years you have no chance. Buyers prefer vendors
who are at least 90.”
The reason is our longer life expectancy with potential buyers seeing themselves “betting on death” but without having the odds in their favour for such a big outlay.
They may also remember the case of Jeanne Calment, the oldest woman in history, who died at 122 after selling her property “en viager” at the age of 90 to her notaire. He paid her the equivalent of €400 a month rente and by her death (after his) his heirs had paid double the price of the property.
Sellers are also holding back as they fear buyers may not have the finances to cope.
The Caisse des Dépôts, which had an operating profit of €1,552million in 2012, can look at the longer term and its project is studying a potential “intermediate” viager where the buyer would be an institutional investor and an investment fund.
The Caisse des Dépôts would buy properties “en viager” and then pay a “rente” each month to the vendor, called the “crédirentier”.
One advantage for the seller is that the buyer cannot go bankrupt.
If the plan is approved by the Caisse des Dépôts management committee, a project with €100m of funds could be set up as early as 2014 with its subsidiary, CNP Assurances, one of the leaders in the French insurance market.
The aim would be to buy several hundred properties to minimise losses and share out the risks.
How does it work exactly?
Viager works by selling a property at a reduced price determined by the seller’s age (with discounts of up to 50% for a seller in their 70s) but averaging 30%.
A €150,000 property would sell for €100,000, for example. The buyer pays the seller 40% as the bouquet and the remaining €60,000 is divided by the time fixed in the contract (usually 10 or 15 years) to give the monthly rente. If the seller dies before the contract period ends, the buyer takes possession; if not, the buyer pays rente until the seller dies.