French Property Market Overview May 2008

Whilst writing we are in the middle of somewhat slow times in the French Property market with many buyers taking a “wait and see” approach. This is the case for some foreign buyers but also a large amount of local French buyers. This is reflected in the slowed growth of property prices which over the last year have been hovering around 4% for the country as a whole. Indeed in many of the less sought after regions and country properties we are seeing this most allowing buyers to often negotiate a good 10% off the price where in previous years would have been very difficult.

The market hardest hit are the properties under £200,000 which makes up the bulk of sales across the country however the properties in exclusive locations with a finite supply like the renovated stone-built residences in central Paris or the luxury apartments and villas on the Cote d’Azur are largely unaffected. In fact property in St Jean Cap Ferrat on average increased by a value of more than 40% while nearby locations such as Antibes showed an increase of 12% clearly demonstrating the continued demand at the higher, luxurious end of the market. Equally renovated property in the prime central areas of Paris have been selling within just a few days and are still seeing prices increase by a good 8% year on year. Prices for these types of properties however already start with quite a high price tag- St Jean Cap Ferrat for instance is mainly made up of exclusive villas and you would need a good 2.5m Euros to even contemplate buying here. Paris and Antibes however have a good supply of apartments and for a prime property in either of these areas you are looking at around 15,000 Euros per m² so for a 45m² 1 bedroom apartment you get on the property ladder for around 675,000 Euros. Although not cheap you are almost guaranteed capital growth, rental and easy resale when the time comes and with continued 100% finance available at relatively low interest rates this still stacks up as a good investment.

Unlike the UK & American banking system the process for obtaining mortgages in France has always been much stricter. This may have frustrated potential investors/home buyers in the past but as a result the French property market is far more stable and has more potential for growth than its developed European counterparts. You may be asked for a lot of documentation but you can still quite easily get 100% finance while these have been withdrawn in other countries as inter-bank lending has become more expensive and riskier.

For foreigners, especially those holding the Sterling or dollar, the Euro has become increasingly expensive and currently sits at 1.27 Euros to the pound down from 1.5 only 8 months before. The outlook however for the short to medium term is that this exchange rate is likely to persevere. Even when the Euros was first introduced the expected average long term exchange rate given underlying economic fundamentals was 1.3 Euros to the pound. The fact that the pound has been so strong over the past few years has given many people a false indication of what the rate should be. In fact the pound may never return to its previous strength and may in fact fall further so those that are holding out for better value from the pound before they buy may well be hoping in vain and in the meantime either missing out on investment opportunities or from buying their dream home. Of course if the pound does fall further then it actually makes sense to purchase now rather than later- no one knows for sure but it does give you food for thought.