French Notaires release their latest property market report, but what should we take from it?15 June
he latest report on the French property market from the Notaires of France has just been released. Increasing numbers of transactions, decelerating price falls and mortgage rate lows have created a tempting market for non-resident investors, reports Athena Advisors.
PRICES - DOWN 1.7% YEAR ON YEAR
Compared to last year, the sale price of homes fell 1.7% with houses showing a slightly more pronounced decrease (-2%) than apartments (-1.2%). The Notaires of France said that the markets’ “leading indicators, whose reliability has steadily improved, suggests a slight increase between June and August."
Nicholas Leach at Athena Advisors (www.athenaadvisors.co.uk) comments:
“Prices are staying soft for resale properties in rural regions, giving non-resident buyers quite a bit of negotiating power. As expected, areas that are popular with international purchasers have been more resilient, with only marginal decreases and in some cases increases. Bordeaux was the best performer with apartments showing a 12.2% increase which balanced out to 1.9% across the year for all property types.”
The report also showed that price increases were also recorded in Rouen, Nantes, Béthune, Lille and Orléans.
TRANSACTIONS - SALES INCREASED 12% YEAR ON YEAR
With softer prices the number of transactions increased from 2012 to 2013. The Notaries recorded an increase of 12% year on year with 740,000 transactions between March 2013 and March 2014. The Greater Paris region posted an increase of 9%.
“In 2013 transactions dropped by 13% against 2012, largely due to the wake of Hollande’s appointment and the subsequent reforms,” continues Leach. “This swing in transactions demonstrates the appetite in the market as attractive prices and very affordable lending creates a perfect mix for buyers.”
For key tourism areas like Paris and the French Alps, the availability of lending has been the linchpin to the French market over the last 9 months with some companies posting record sales from the ski season. In the six months from Dec ’13 to May ’14 French property specialists Athena Advisors saw an 85% increase on property sales for the same period the previous year, posting sales of French property to non-residents of over €50m.
MORTGAGE RATES REMAIN AT ALL-TIME LOWS
"Not since the late '40s have mortgage rates been so low," said the Notaries, using figures from the Observatory Crédit Logement / CSA May.
John Luke Busby at French Private Finance (www.frenchprivatefinance.com) comments:
“Interest rates have now fallen to their lowest ever levels with a 10 year fixed rate in France now standing at 2.65% and a 20 year rate at 3.25%, the lowest we have seen for a little over a year and since the war before that.”
“Even before this latest drop, non-residents were capitalising on the market; in our busiest week across the ski property season we were handling non-resident applications with a total value of over €38m.”
“In France each €100k currently costs approximately €500 per month over 25 years, €600 per month over 20 years and €700 per month over 15 years. There’s never been so much value in the French market which is why high end buyers are returning in force.
Nicholas Leach comments: “It took a while but international buyers are now realising the significance of the current deals available in the French mortgage market. The lure of these new rock bottom rates coupled with the long term security typical of this market means we’ll see more people releasing idle savings and investing them in French property.”
“The significant factor for the market is that buyers at all levels are utilising the cheap borrowing rates. An increasing number of buyers with budgets over €3m and who can afford to pay cash are still choosing to finance their purchase, often through private French banks.”
ONLY 312,066 NEW HOMES BUILT – LACK OF NEW-BUILD SUPPLY FOR FOREIGN INVESTORS INTENSIFIES MARKET
New home construction is still down with only 312,066 building starts between June 2013 and May 2014. With the government targeting 500,000 new homes per year this falls well below what they had hoped to achieve.
“These figures tell two different tales,” continues Leach. “With fewer new homes being built the domestic market will be tricky and it may lead to rises in rental costs. Internationally, the demand for new-builds from non-resident investors is still very strong, so there is a real supply and demand scenario.”
“Non-resident investors prefer new-builds as they have lower buying costs and, being new, are easier to manage and maintain from a distance.”
HOLDING PERIODS AT NEW HIGHS
The duration of ownership has increased in France to record highs with 10.5 years on average for apartments and 12 years for houses. These are the highest figures for 10 years "and are higher by almost 2 years than they were five or six years ago,” said the Notaries.
“This figure reflects the current wait and see wait trend in the French market,” said Nicholas Leach at Athena Advisors.