Monday, April 4, 2011

Spanish property woes and the French market

Reading the latest account of Spain's troubled property market can provoke comparisons with the relative security of the French property buying and selling system.

Writing recently in the Guardian newspaper, Rupert Jones has highlighted not only the surplus of properties empty and for sale - an estimated 600,000 new and 200,000 part completed - and the dramatic decline in sale prices. Official figures from the Bank of Spain talk of a 17% reduction since 2007, based on estimated values, but estate agents say that the real drop is prices can be between 20% and 50% in some areas of the country.

In addition to the banks holding thousands of repossessed properties which they are required to try and sell after two years, many Spanish owners are competing with foreign investors in trying to offload their holiday properties. In contrast with France's 10% of second home properties, an RICS study quoted in the article estimates that one fifth of Spanish households own a second property, often as an escape from an over-crowded urban apartment, which may be occupied by family several generations. In addition Spain boasts Europe's highest level of property ownership at 82% with a tiny rental market concentrated in Madrid and Barcelona.

A business consultant is quoted as saying that as a result "there is an entire generation of young Spaniards with a millstone round their becks. They will have to work their whole lives to pay for houses now worth half what they bought them for".

Could it happen in France? Certainly there are reported price reductions in some areas, but rarely more than 5 or 10 per cent, with price increases routinely recorded in inner cities (led inveitably by Paris), according to figures provided by Notaires de France and the estates agents' body FNAIM. France's traditionally cautious bank lending policies - based on the customer's ability to repay rather than the notional value of the property - while often crticised as inhibiting entry to the market, have prevented the rabid speculation witnessed in Spain. The property market has been given a fillip by the French government with schemes such as the zero per cent loan for first time buyers recently introduced.

In contrast also to the scandals of "illegally" contructed Spanish properties, France's system of property land registration, as well as zoning policies that forbid construction in areas of high risk from hazards such as flooding, ensure that property transactions are legal and transparent, and fair to both parties.

Source: Rupert Jones, The Guardian, 02 April 2011.  

Photo: AFP/P Dozo