What is Happening in the Housing Market?
Friday 02 August 2013
House prices are continuing to fall in France, but it's the usual narrative of a very mixed picture across the country, with localised information patchy.
Over the past month or so there have been a clutch of reports on the state of the housing market in France from estate agents, notaires and economists.
The basis on which each of the analysts presents their reviews makes comparison difficult, but while most of the figures are pointing south, prices are still showing strong resistance, with actual price increases in some areas, as well some evidence of an increase in sales activity.
On a broad canvas, the major estate agent chains Century 21, Laforêt, and Orpi, as well as the national association of estate agents FNAIM, all report a moderate fall in average prices in the first six months of this year, and of between 2.5% and 3.6% over the past year.
The notaires also weighed in with their own, ostensibly more reliable review, with the general conclusion that prices of existing homes in the regions actually increased by around 0.5% in the first quarter of the year compared to the last quarter of 2012. As this figure covers sale contracts signed in Q42012, and completed in Q12013 the information is more historic than that provided by the agents, so what it may achieve in reliability it does lack in currency. They are more in line with the agents over a fully year, stating that over the year to 30th April house prices in the regions have fallen by an average of -1.8%.
Beyond these general conclusions the information that is provided by all of the commentators is scant and cryptic. In particular, there is a lack of information on what is happening between properties of different size and condition, and only limited geographic analysis.
Such geographic analysis that is provided shows, as always, substantial variation across the country, with the rise and fall in prices in some regions far greater than the headline figures above would suggest.
FNAIM state that over the past full year to 30th June, with the exception of Upper Normandy, which remained stable, prices in all regions in France have fallen, with the largest falls occurring in Lower Normandy (-7.7%), France-Comte (-7.6%), Picardie (-7.3%), Provence Cote-d’Azur (-5.9%), Languedoc-Roussillon (-5.7%) and Brittany (-5.2%).
Some of these falls are mirrored in the analysis by Century 21, who report the largest falls over the same period in the regions of Lower Normandy (-8.8%), France-Comte (-7.7%), and Brittany (7.4%), but who also report large falls in Pays-de-la-Loire (-6.5%), Champagne-Ardenne (-6.3%), and Centre (-5.1%). However, in contrast to FNAIM, they also consider that prices have risen in Poitou-Charentes, Limousin, Aquitaine, Lorraine, Alsace and Burgundy.
The only analysts to provide information on a departmental level are the notaires, although they do not do so for the whole country. They state that in the year to 30th April prices for houses fell in around half of the departments, whilst in the remaining departments prices were either stable or they increased. However, they only give the figures for a handful of departments.
Amongst those departments showing the largest falls over the year are Var (-9.1%), Charente Maritime (-7%), Vaucluse (-6.5%) and Morbihan (-5.90%), all departments in which the second homes market is large.
By contrast, significant price increases occurred in Hérault (+8,5%), Haute-Garonne (+6%), Bouches-du-Rhône (+3.1%) and Rhône (+2.2%), all departments that are strong economic centres.
Such large variations between the departments is difficult to fathom and makes for a very confusing picture. This is particularly the case for properties in the countryside, where the lower number of sales and variation in property types makes it very difficult to assess price changes with any high degree of accuracy.
Indeed, as we reported some months ago, the notaires now only provide information on in the median average change (the number in the middle of a group of numbers), not the arithmetic mean of prices. That is a very different kind of 'average', in which a low level of sales in an area is more likely to result in larger irregular movements in average prices.
Despite the unanimous view that sales will be lower in 2013 than 2012 (itself lower than in 2011) Century 21 and Laforêt report that sales have increased in many regions in the first half of the year over 2012, albeit at a lower budget. They ascribe the renewed activity to lower prices and historically low mortgage interest rates, which are under 3% for a 20 year mortgage, "jamais été aussi bas", according to the mortgage observatory, the Observatoire Crédit Logement/CSA.
Nevertheless, Laforêt consider the increased sales a "trompe l’œil", as the level of demand from buyers remains fragile, there are a fair number of 'opportunists' looking for a bargain, and there is a shortage of suitable properties in many areas due to the reluctance of sellers to put their properties on the market. Much of the stock is appearing on the market simply due to enforced circumstances - divorce, death or change of job. Smaller properties, in particular, are in short supply, whilst the supply of larger homes exceeds the level of demand.
That view tends to chime with that of the notaires who also report an increase in sales in the first quarter, which they consider to be a blip, due to many sellers anticipating a large increase in capital gains tax.
The leading French mortgage broker Empruntus also cautions on reading much into the increase in mortgage loans in 2013, for they say much of this activity is due to owners taking advantage of lower rates to refinance their mortgage.
In view of the general lack of supply and the low level of interest rates there is no doomsday forecast for the market, and the view of most analysts is probably best collectively expressed by Credit Agricole, who state that 'the French housing market is characterised by fundamentals that are structurally favourable, and which should enable the process of price correction to be slow and gradual."
This article was featured in our Newsletter dated 02/08/2013