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Will France Become the Next Country to Endure a Property Slump?

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real estate market  real estate sector  London  Global Property Guide  France  Paris  Monaco  Francois Hollande  Pierre Sabatier  Graham Downie  Peter Elias  Bordeaux  French Property Market 

Will France Become the Next Country to Endure a Property Slump?

By - Thursday 31 May 2012

An article in The Telegraph suggested France could be on the brink of a significant property market slump earlier this month, with Pierre Sabatier from consultancy PrimeView stating prices could drop by as much as 40 per cent over the next decade. He explained an ageing population will contribute to the decline in the French real estate sector, with more people selling homes than buying. Mr Sabatier pointed out the majority of purchasers are under the age of 58, while those in the older age bracket account for most of the vendors in the nation. He predicted the number of buyers will stay constant, while the level of sellers will increase by around 1.2 million every five years for the next two to three decades.

"Ageing means the end of property's golden age. It may be less rapid than in the US because French households have less solvency problems, but we think a 40 per cent fall may be inevitable over five to ten years," Mr Sabatier concluded. However, not everyone believes the French market will fall so far, with founder of Cognac Property Services Graham Downie suggesting overseas buyers could help prop the sector up. "Underlying demand remains strong from French nationals and with 50 million-plus visitors every year, it remains the most popular tourist destination in the world," he said.

Mr Downie believes prices will "level off" in 2012, but he stressed the country is comprised of a vast number of micro markets, which means even though some regions may experience falling values, others could see small rises, too. He expects any changes to stay in single digits, though. Founder and managing director of Allez-Francais Peter Elias described the market as "fairly flat, with prices stable outside of the large cities - where there are signs of price inflation". He went on to point out there is currently a high level of stock for sale, which is providing buyers with the leverage to negotiate lower purchase prices.

Although the nation's property sector is holding up at present, there are industry figures who are concerned about the impact the country's new president Francois Hollande - and his economic policies - could have on the nation's property market. Mr Elias explained Mr Hollande's plans to introduce higher levels of taxation for the super wealthy could push these investors out of France's real estate sector and into neighbouring nations - especially those that are not part of the single currency. He cited London as a likely target due to its safe haven status, while Monaco is another option thanks to its favourable tax regime. He acknowledged, however, that this is only likely to affect the top end of the market in large cities, such as Paris and Bordeaux. 

Last month, a Global Property Guide article indicated the slowdown in the French real estate market has already started, pointing to weak final quarter data for 2011, compared to the previous nine months. The publication added that strong price growth in the apartment sector between 2000 and 2011 and controls on rent rises have resulted in "unsatisfactory rental yields, especially in Paris, which now has yields ranging from 3.26 per cent to 3.85 per cent".

In addition, an increase in taxation on housing maintenance and renovation from five to seven per cent and a cut in the tax credits available on the installation of energy-saving equipment could also put downward pressure on the French property market, the publication asserted. A further worry for buyers is the performance of the euro, Mr Elias highlighted. He cited concerns that Mr Hollande's policy to promote economic growth rather than austerity could weaken the euro further, which is currently being exacerbated by the situation in Greece. Mr Elias added there are concerns similar problems could be experienced in Portugal, Spain and Italy, which would undermine the eurozone further and therefore negatively impact the French real estate sector.

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