According to a report by FNAIM (the French estate agents body) published today in Le Figaro, French property prices were down slightly again in August 2009 at 1.2%, slightly higher for houses compared with apartments.
This reflects an overall drop in property prices of 8.1% in the 12 months from August 2008, again with slight variations of -7.2% for apartments and -8.8% for houses. These price reductions are the first in ten years, when increases of 14% were recorded in 2003, 15.5% (a record) in 2004, 10.9% in 2005, 7.2% in 2006 and 3.6 in 2007.
In contrast, the number of annual transactions involving both older and new-build properties showed a steady increase from 2005 (625,000 older properties were sold and 121,000 new-builds), reaching a total of 650,000 and 127,000 respectively in 2007; followed by a decline in 2008 (575,000; 80,000 respectively), and a predicted 500,000 sales of older properties in 2009 and 80,000 new-builds.
The market for new-builds has been aided by a number of recent government tax-saving schemes to encourage investment in properties destined for rental, targeted at those on low incomes, and as part of an overall plan to ease France's chronic housing shortage.
However, a number of buy-to-let projects built under these schemes have failed to find tenants. I have just read of an apartment in Brive-la-Gaillarde (Corrèze,19) purchased in 2006 for 104,000 that has recently been sold for 76,000 euros! Among the reasons cited for the failure of many of these projects to find tenants are poor quality materials and workmanship, and inappropriate location - generally too far from centres of employment, schools and shopping, and lacking the public transport needed by tenants on low incomes. Many of them are unsaleable.
We always urge clients to take advice before investing in buy-to-let property, particularly under French tax-saving schemes, as to the viability of the project.