Monday, February 27, 2012

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.  

Monday, February 6, 2012

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: February 2012, Expert Advice, Peter-Danton de Rouffignac