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Property Market

Housing Market Shows Signs of Correction

Tuesday 01 November 2011

Despite some divergences amongst French estate agents on the state of the housing market, there is general agreement that it is slowing.

The national association of estate agents, FNAIM, recently reported that house prices fell on average by 1.3% in the third quarter, although this still meant that prices had increased by an average of 4.1% over the past 12 months.

A more pronounced fall in prices was reported by the large estate agents chain ‘Century 21’ who stated that house prices had fallen on average by 4% in the third quarter, in comparison with the previous six months.

Although a bit behind the curve, the French notaires also recently published their market report for the second quarter of the year, which showed that house prices outside of the Paris region were broadly stable, but with the usual (and substantial) regional and departmental differences.

According to the notaires, prices fell in 16 departments, while there had been a significant increase in prices in 15 departments. Sadly for us, however, they are a little short on the actual figures, which are not given.

Prices UpPrices Down
Ardèche Aisne
Ardennes Alpes-de-Haute-Provence
Aube Cantal
Corse-du-Sud Charente
Haute-Corse Creuse
Dordogne Drôme
Jura Indre
Haute-Loire Haute-Marne
Lot-et-Garonne Meurthe-et-Moselle
Morbihan Orne
Moselle Hautes-Pyrénées
Nièvre Pyrénées-Orientales
Haute-Saône Haut-Rhin
Haute-Vienne Deux-Sèvres
Territoire-de-Belfort Somme

Like the notaires, both FNAIM and Century 21 report wide variations in price movements across the country, but although FNIAM provide regional information for the past 12 months (see table below), only Century 21 seem bold enough to say what has been happening at a regional level for the third quarter ending September 2011.

According to them prices in the third quarter rose by around 5% in five regions (Aquitaine, Auvergne, Franche-Comté, Upper-Normandy and Limousin), while prices went down in Burgundy (-9.5%), Centre (-5.4%), Lorraine, (-4.4%), Provence-Alpes-Côte-D'azur (-3.7%), Nord Pas-de-Calais Picardie (-3.4%), Lower Normandy (-3%) and Champagne-Ardenne (-1.3%).

In the remaining regions prices were either stagnant or grew by only a small amount.

Whatever the differences being expressed, all three seem agreed that the volume of sales is going down, and that the overall outlook is, at best, for price stability.

Although FNAIM express concern about the ‘signaux inquiétants' in the housing market, for Century 21 prices need to drop even further for there to be revival in sales. They consider, in particular, that some further adjustment is needed in order to bring back younger households, many of whom have been priced out of the market.

The Century 21 view is one that seems to be shared by Credit Agricole, who in their own review of the market consider that house prices remain substantially out of line with incomes, with buyers having to sacrifice space, condition and location in order to be able to buy.

They ascribe the resilience of prices to date mainly to prudent controls on credit in France ('ce qui a évité la formation d'une «bulle» du crédit, à la différence des pays anglo-saxons’!), demographic factors and a shortage in supply.

Nevertheless, they consider that the sales of older property will slow by around 3% this year and 8% next year. Although they they continue to predict house price growth of 4% for this year, they forecast the price of older property will fall back by 5% to 6% next year.

The main factors leading to a fall in prices are:

  • A deteriorating economic situation, with low growth and unemployment around 10%;
  • An increase in interest rates and toughening credit conditions from the banks;
  • A overvaluation of property prices by as much as 25% in the regions (35% in Paris);
  • A toughening fiscal outlook, including an increase in capital gains tax, a reduction in tax breaks for investment properties, and more general tax increases.

The French house-builders association (Fédération des promoteurs immobiliers - FPI) consider that there will be a reduction in the supply and sale of new homes, primarily due to reduced interest from investors. Already this year, they report the sales of new homes are down by over 20%. Next year, the tax credits available for investment (Scellier) properties goes down to 14% from 22% this year.

However, although it has now become a buyer's market, there is as yet no general agreement that the reduction in the level of sales will be accompanied by any major collapse in prices. It may well be a case of turkeys not voting for Christmas, but the general strength of the market over over the past two years has surprised many analysts.

As one estate agent commented ‘Given the fall in the stock market and the uncertainty surrounding many other forms of investment, property is likely to continue to be a safe haven investment bet for many people’.

An opinion survey carried out by FNAIM seems to confirm the level of confidence of the public in the value of property, with only 15% predicting that prices will drop. Around a third of those surveyed also considered they would be buying within the next two years.

Market observer Maitre Pailhès, from the Chambre des Notaires de Haute-Garonne, nuances that, ‘Ce n'est pas un marché de crise, c'est un marché plus sage’.

These sentiments are shared by Trevor Leggett of Leggett Immobilier, who says that his own agency has experienced a good year so far, with sales up by 28% over last year, 'mainly because vendors have had to become more realistic against buyers who have already sold and have cash in hand', he says.

He considers that 'property is at last now coming onto the market at a price that will sell. So the order of the day is that businesses and house sellers alike have to be realistic, and we all need to get used to working within the parameters of a recession that is going to stick around for a good few years to come.'


The following table shows the percentage change in the price of apartments and houses by region for the past two years, as recently reported by FNAIM.

Regional Property Prices
Alsace +8.8 +3.2 +1.6 +4.2
Aquitaine +0.5 +3.1 0.0 +1.8
Auvergne +1.9 +7.2 +2.4 +7.4
Brittany +2.2 -5.8 +0.6 -4.6
Burgundy +1.8 +4.9 +1.5 N/A
Centre -2.0 +2.6 +1.0 N/A
Champagne-Ardenne +2.9 +11.2 +2.5 +10.1
Franche-Comté N/A N/A -12.7 +9.6
Ile-de-France +3.9 +8.1 +5.1 +2.5
Languedoc-Roussillon -1.4 +1.7 -3.9 +2.9
Limousin -3.6 +7.9 -3.5 +5.3
Lorraine N/A N/A -7.3 +6.0
Lower-Normandy N/A N/A -4.5 +5.2
Midi-Pyrénées +5.3 +8.4 +2.6 N/A
Nord-Pas-de-Calais N/A +1.9 +4.8 +6.1
Pays-de-la-Loire -3.0 +8.3 +2.1 +6.4
Picardy N/A +1.7 -1.9 +4.4
Poitou-Charentes +7.3 N/A +1.4 +0.5
PACA +5.6 +12.6 +4.9 +2.8
Rhône-Alpes -6.8 +3.0 -2.8 +4.1
Upper-Normandy N/A +6.6 +1.9 N/A

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