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French property market : is the crisis over ?


The property market in recent months seems to be growing, even though the figures do not yet reflect this trend.

Despite a significant improvement in the number of transactions, these, however, fall short of those in the years 1999-2007. We must await the confidence of buyers and sellers to regain fluency in a sector that had lost so much, for several reasons.

Many buyers were expecting a real drop in prices, which had doubled in ten years in some areas. This fall didn’t happen; despite four years of price adjustments, prices have fallen by about 5 % only in urban areas (far from what some were expecting) and up to 30 % in some rural areas.

The interest rates for borrowers declined grad-ually to historically low levels, thus making many buyers solvent again. But this continuous decline, accompanied by a price adjustment, did not encourage them to rush their purchase decision because time was on their side.

The proliferation of regulations restraining property transactions and increasingly aggressive taxes have gradually wearied older property investors, who had recently perked up with the “Pinel” mechanism. For several years now, the property market has, become a market mainly for users.

This imbalance between a large number of sellers still clinging on to values that are less and less realistic and the few purchasers hoping for a price adjustment has inflated the number of properties for sale.


    • It is customary to say that the property year starts in the spring, because it is during this season that many buyers view properties and sign preliminary contracts of sale so as to be able to move into their new properties at the start of the new school year.

    • This year has been similar but, in addition to the usual seasonal pattern, Spring 2015 showed a slight rise in interest rates.

    • This has had a major psychological impact on buyers. It wasn’t a question of them waiting and delaying their purchase decision because time was already not on their side, although in reality the financial consequences of a rise of 0.10 or 0.20 % in their rates was not going to make much difference in monthly repayments spread over 20 years!

    • The consequences had various effects : this sudden influx of buyers initially deflated stocks of properties for sale and, for areas badly in need of housing stock where this stock was not as large, put pressure on prices that were quick to rise, erasing the slight decline of the previous nine months. It would, therefore, not be surprising that the sales price recorded between now and the end of the year in dynamic urban areas would be in balance year on year.


    • As so often, the fluctuation of interest rates will be decisive.

    • If they continue to rise, even slightly, that could continue to affect buyers psychologically for, fearing in addition a rise in prices in certain pressured sectors, they would return to the market en masse. For them it could also be the return of numerous “comfort purchases”, which had tended to show a steep decline.

    • Indeed, for several years, many home owners, through a lack of confidence or visibility, defer their plans to move house, even if that is no longer appropriate following the departure or arrival of a child or a change in employment.

    • The return of this class of owner will help make the market more dynamic without rebalancing it, as these owners are often both sellers and buyers. The risk of price rises in areas under pressure cannot be excluded, especially if demand remains steady or even increases as a result of low availability.

    • If interest rates fall, or remain stable (which seems to be the most likely), the psychological effect will disappear and time will again favour purchasers, as it has for the past three years. There will then be a return to a slight price adjustment in conditions of low transaction volumes.