Rentals way ahead of inflation and salary rises

According to a report published this weekend by INSEE, one in five French people are spending more than 30% of their income on housing, making it their number one cost and up to 40% in the private sector, leaving those on the lowest wages (the French SMIC) with around 600 euros a month to spend on living costs after paying their rent. 

Particularly hardest hit are those living in rented accommodation, where average rents have risen by 17% between 2005 and 2010 - ahead of inflation at 8% and average wage and salary rises of 7.2%.

Source: LeParisien.fr Aurélie Lebelle 17 March 2012.

French Property News, March 2012

In this issue I have written an interesting success story, more satisfying as it concerns an old friend and university colleague, Jonathan Healey. Jonathan and his partner Matthieu Bazan have opened a superb boutique hotel in Argelès-sur-mer, in a converted maison de maitre in the heart of the old village, opposite the parish church. They offer double en-suite rooms and organic food. All the rooms have heating and air condiioning, individually controlled. You can see more on http:// hostalet.fr

Jonathan is an established wine writer and completed his studies in oenology at UC Davis (California) and in addition to offering wine courses based at the hotel has he lectured at Perpignan University and Girona University as part of their wine and tourism programmes. He also advises and creates websites for many local and distant wine producers, with clients all over France. See www.jonathanhealey.com

Building diagnostics

It is a legal requirement in France for certain diagnostic tests to be undertaken (at the cost of the owner) when a house or apartment is put on the market for sale. Over the years the tests have become more complicated and currently include not only those for lead, asbestos, termites, dimensions (loi Carrez), gas and electrical installations etc but the most recent addition a 'certificate of energy efficiency' (DPE  = diagnostique performance energique) which must be carried out and the results published the moment a property is put on the market. The other tests were normally only undertaken at the time a buyer signed a compromis de vente (initial sale contract).

The latest DPE tests were introduced at comparatively short notice and there were concerns at the time that there were insufficient qualified testers to cope with a sudden increase in demand (every property coming onto the agent's books!) and emergency training programmes were hastily put together. At a time of high unemployment many feared that it would lead to abuses.

This has proved to be the case, according to a recent report by DGCCRF (the French government department dealing with consumer protection and fraud). Their inspectors recently checked 559 diagnostic 'experts' and found that 60% (337) of them lacked proper qualifications, produced widely differing results and were guilty of over-charging - a situation that the report describes as 'tromperies' (deliberate fraud) - though there is no mention of what legal sanctions, if any, have been applied.

This is a disgraceful situation, given that vendors are obliged to have the tests done, and the only advice I can offer is to shop around and obtain a number of comparative quotes, and always check that the diagnostic expert is properly qualified and insured. His/her credentials should form part of the report which is an important safeguard for the potential buyer.

Finally, note that as part of the government's easing of planning restraints from March (allowing an additional 30% to be added to existing properties, subject to local approval) that the former SHON/SHOB (allowable constructible area) is now referred to simply as the surface plancher (floor area) and much easier to calculate.

French elections and the property market

I was recently asked to comment on the effect on the French property market of the 2012 elections compared with what happened in 2007, as there is a belief - I think unfounded - that everything is on hold until after May 2012.

Looking first at what commentators were saying at the start of 2007, the principal concerns seems to have been about interest rates and the policies of the European Central Bank, combined with statements that the French housing demand continued to be ahead of supply. Note that this was just ahead of the sub-prime crisis and the eventual collapse of Lehmann Bros bank in the USA (September 2008) which sparked off the current crisis.

Although some commentators spoke of 2008 being l'année de rupture when the spiral of rising property prices would be finally halted,  some speaking of a 25% drop till 2010, in the event prices fell by an average 3% in 2008 and 7% in 2009, but rose again from 2010.

Coming to 2012, Notaires de France have just announced 783,000 property sales completed in 2011, slightly down on previous years. However L'Observatoire crédit logement CSA any slowdown in 2012 can be explained by the ending of the no-interest deposit scheme (PTZ) which ended on 1 January and continuing general concerns - by both borrowers and lenders - about unemployment. They note that lenders are now insisting on the 33% ability-to-pay rules and even those in permanent jobs may be refused credit if the bank considers that their employer is in difficulty!

Some banks however - including Banque Populaire, BNP and LCL 5Crédit Lyonnais) - are pursuing 'aggressive lending policies' as a way of attracting new business. Interest rates remain stable and the 'loss of France's triple AAA rating appears to have had no practical effect'.

It is hard to understand the caution of potential buyers in this pre-election period. All the major parties have included statements about the need to build more social housing and free-up surplus state land and buildings for this purpose. There is also talk, even by the UMP of M Sarkozy, about capping excessively high rents that are perceived as being above the market rate. The UMP have also passed a law to allow additional construction of up to 30% on existing sites - such as adding an extension to your house - to encourage families to house their aging parents and allow the latter to vacate a larger property that could be used by a family.

France still suffers from a chronic housing shortage, as families break up and re-form, and more people choose to live alone; while at least 2 million homes are considered to be below acceptable standards and need to be replaced.

I have discussed the French property market in depth in the February 2012 edition of French Property News.  

French Property News, February 2012 (our 200th post!)

In this issue I have offered an up-to-date review of the French property market, looking at France's housing stock and how it is divided between apartments (just 20%) and individual homes of varying sizes, and 32 millions households, just over half of whom are home owners. This last figure contrasts with higher levels of home ownership in Europe - including Spain (83%), Ireland (78%) and Great Britain (70%).

Although France's housing stock has risen from 25 million in 1984 to today's figure, there is still a housing shortage due to marriage breakup and newly constitutde family units, as well as larger numbers of people living on their own. An estimated 2 to 4 million properties are considered to be sub-standard and requiring replacement, including many large estates constructed in the sixties and seventies. 

French people also own three million second homes, either inherited or purchased as security for retirement, though the majority are sold by their owners within 10 years of acquisition. Reasons given include children growing up, the trend to travelling further afield and taking holidays outside France, and the need to raise capital (noting that in the last decade some property values have risen by 150%).

Nonetheless transactions involving second homes represent just 7% of the market, though this can be considerably higher in coastal and holiday areas, where the proportion of second homes can be s high as 70% of the local housing stock. 

Source: www.french-property-news.com February 2012, Expert Advice, Peter-Danton de Rouffignac

Creating jobs in France

As we approach the forthcoming elections in France, with radically different programmes on offer from left and right, it seems the French are still struggling with the idea of simplifying the mass of rules and regulations surrounding the creation and management of even small business.

Even though the French auto-entrepreneur scheme has been a relative success (with nearly a million new business creations since its launch) the social security system remains in a total mess, divided as it is into numerous organisations or special regimes depending on your occupation. The situation becomes even more nightmarish if you undertake more than one recognised activity. A lecturer at the Sorbonne complained to me 'for the French social authorities I am two people - a lecturer and a consultant - paying two lots of charges to two different organisations. I also happen to have inherited 20 hectares of land which it is easier to simply let out to a local farmer: If I even thought about cultivating it myself, I would have to join also the special regime for farmers and growers. It is complete madness'.

Retired British people living in France are particularly badly hit, especially if they receive a British pension and depend on the French basic health care system for their sickness cover. Registering as an auto-entrepreneur (self-employed) alters all this, with loss of the basic cover and compulsory entry into a social regime covering the type of work undertaken (from craftsmen to business consultants). As a result many people simply give up, at a time when it is prudent for all of us to try and earn and save a little extra, and not have to rely on handouts from the state, even where these are available. 

As a 'victim' of this complex system I have had several meetings with representatives of the various French social organisations and explained the British system - basically explaining that you can receive a pension and work at the same time, paying some income tax (after deducting expenses) above the limit of of one's individual allowances. 'It is really as simple as that?' said one astonished official, 'Yes' I replied as I contemplated the 16 different deductions (social charges) on my payslip - in reality an A4 sheet! - which included 'pension contributions'........

France is not alone in maintaining a complex regulatory system for new business startups (a minefield of regulations, restrictions, licences and permissions) and for the collection and payment of tax and social charges. In a recent interview with young people facing unemployment in Italy, Spain and Greece, several complained of the practical barriers to starting even the smallest business, administrative delays and in some cases the need to hand over a fee (bribe) to a government official in order to get anything done.

It is surprising that in these times of crisis and large-scale unemployment, neither side in France's election campaign has come forward with anything like a solution. 

P-D de R.

68% of French property transactions handled by agencies

In a report published this morning in the LeParisien*, research undertaken by MeilleursAgents.com* shows that of all property transactions in France, no less than 68% are handled by estate agencies, compared with 19% by networks (introducing individuals to individuals) and 13% by other means, including notaires, family and friends.

The research goes on to report that out of evey 100 clients who visit an agency, 79% ended up buying through the agency - in the case of sellers, the proportion was 70%. Results for those consulting the person-to-person networks were 26% and 28% respectively.

The researchers also found that higher value properties of five rooms or more were most often entrusted to agencies by their owners (in 30% of cases), compared with 24% for studios and two-room apartments.

Signing an exclusive sales mandate with one agency resulted in a sale within three months in 77% of cases, compared with 55% where multiple mandates had been given to two or more agencies.

Sources: www.LeParisien.fr www.MeilleursAgents.com AFP/Eric Piermont