Will the French property market remain buoyant?15th February 2016
French property transaction levels to hit early 2000 levels
New figures from French real estate authorities suggest French property sales will exceed the record levels seen after the turn of the millennium.
Figures from the French Notaires show that the number of transactions completed in the twelve months to December 2015 are estimated at 792,000, a 12.5% jump year on year and the highest recorded transaction volumes since 2012. A statement from the FNAIM (National Federation of French Real Estate Agents) said that with some Q4 figures still to be finalised, transactions could reach an estimated 800,000 for 2015, a level not seen since the early 2000s.
“These figures are only for resale properties but they clearly demonstrate how low interest rates, a weaker euro and good supply levels in popular locations fuelled the market in 2015,” comments Lloyd Hughes, Head of Communications at Athena Advisers. “So far this trend has continued in 2016, even despite a shifting pound in recent months. Dollar buyers are still the biggest winners on the currency scene and the French are buying too, which is an even stronger sign that the market will remain buoyant for now.”
Quarterly prices increase, Paris leads
"Paris is leading the way in terms of price rises, although the recent pickup is deceptive as prices year on year are still down,” continues Hughes. “Just like the transaction numbers, these figures are only for resale properties. The new-build sector in France is entirely different with much higher demand within more condensed markets. It’s a good sign though for resale properties and with prices still soft overall the noticeably high transaction numbers will continue.”
Prices for resale properties across France rose by 0.3% from Q2 to Q3 2015, with Greater Paris prices recording the highest change of 0.8% with properties in regional France recording a modest 0.1% increase. However, year on year the numbers paint a different picture. Prices across France have dropped by -1.7%, and by -1.9% across regional France.
In Greater Paris the year on year fall can be taken in a much more positive light as the speed of the drop is easing; -1.2% in Q3 2015 compared to -2.4% in Q2 2015. "It's good to see Paris on the up again, but it's worth noting that Greater Paris, known as the Ile-de-France region, is around 10 times the size of Greater London," adds Hughes. "This means that figures for this area are more exposed to suburban price fluctuations. Central Paris is occupies just 1/100th of Greater Paris and prices are more insulated as a result."
% of foreign buyers drops, but increases in specific markets
The Notaires figures also show that the proportion of foreign residents buying across France fell to 1% in 2015, down from 1.4% in 2014 and a peak of 2.8% in 2006-07. "The bigger price fluctuations seen in France's rural areas are making buyers a little wary," adds Hughes. Some markets though are being favoured. "Year on year we have seen a higher number of foreign investors target key markets like Paris, the French Alps and the cities and towns dotting the south coast. Prices here are more stable and rental yields can be higher."
New-build demand increases, developers respond
According to figures from Ministry of Ecology, Sustainable Development and Energy, building approvals for new-build apartment developments were up 7.4% from September to November 2015 compared to the previous three months. Approvals for new-build single dwellings were down by 3.7% for the same period, making the overall figure for new-build approvals an increase of 2.7%.
“Properties in rural and semi-rural locations across regional France have been more exposed to price fluctuations over the past two years, which is one reason why we’re seeing higher demand for new-build properties in locations across central Paris and the Alps. The other reason is that the running and buying costs for new-builds are around half that of resale. Also, new-builds are generally easier to rent out and don’t require costly renovations, however there is often a premium attached, in the region of 15-20% more than their resale counterpart.”
French Alps sees new-build development spike
French developers have responded to the increase in demand for new-build, which can be shown by the increase in building approvals. The French Alps in particular has seen a spike in development, particularly in the most popular resorts, although the availability of developable land remains an issue.
“During the middle of last ski season French mortgage rates hit their lowest ever levels and the dollar and sterling were at 7 and 11 year highs on the euro,” adds Hughes. “This created the perfect conditions for foreign buyers and sales activity spiked. Since then developers have been responding to this demand with new launches in almost all of the top French ski resorts throughout 2015 and into this ski season. Even despite the tempering of the pound over the last 6 weeks the demand has continued in 2016 and is likely to stay the same for the rest of the season.”
Figures from Athena Advisers show that property prices increases for new-build apartments in smaller resorts outweigh that of the larger resorts. Val d’Isere in the Espace Killy for example has seen prices increases of 10% in the last twelve months.
French mortgage rates continue to give foreign buyers confidence
"International buyers in France are favouring long term fixed rate mortgages with terms of 20 and 25 years being the most popular,” comments John Busby at French Private Finance (www.frenchprivatefinance.com). “Fixed rates are just above their all time lows with repayment mortgages available at 2.70% on a 20-year fix."
“Knowing exactly what your monthly repayments will be in 19 years time on a low rate mortgage gives buyers lots of confidence. They usually have the ability to plan their French property finances much further ahead than they can in their home countries. Monthly repayments for each €100,000 borrowed now stand at €540."
"Well-priced, well-located property continues to sell and there is a general feeling of cautious optimism based on the expectation that asset prices will rise in France."