What are the trends for 2017?

Updated on Wednesday 25 January 2017

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For several years, the property market has been dependent on movements in lending rates. A sharp rise would curb sales and drive prices down, whereas a substantial fall would have the opposite effect. However, rates are not the only factor in influencing prices; many other external parameters have an impact on prices.

In the face of financial investments with uncertain returns, households are resorting to safe-havens, with property being one of the choices of preference for the French.

Buyers have found additional reasons, through the substantial decline in interest rates and, for first-time buyers, in the overhaul in interest-free loans. Government mechanisms which have been revamped in recent years - and which are renewed in the draft finance bill - have moved in the right direction and are now effective, whether it be interest-free loans or even the Pinel scheme, which encourages rental investment.

The knock-on effect created by falling interest rates does not, alone, account for the renewed interest in property. Moreover, it should continue in 2017, ensuring that sales volumes are kept high.

As for prices, they will depend primarily on the mechanisms used by policies which may have different influences on the market. A return to a capital gain at 15 years could dampen price rises, whilst a stepping-up of investment in bricks and mortar would automatically boost buyer numbers, consequently putting pressure on prices.

It will be remembered that the proposals put forward by Notaires de France to the candidates in the French presidential election advocate this position, seeking primarily solutions in order to enhance market fluidity. Under the proposals put forward by the Conseil supérieur du notariat (High Council of French Notaries) and in keeping with existing mechanisms, encouragement should be given to first-time buyers, improving particularly fiscal transparency and clarity for investors, and even reviewing regulations governing capital gains.

In any event, the announced rate increase for 2017 should not have the same psychological effect as the unexpected one of spring 2015. The latter has been announced and the respective rise in rates over the coming year has been factored in by future buyers; it should not greatly alter their solvency.

As for Brexit, the return of large numbers of French people living in the UK could put considerable pressure on high-value properties.
However, in this respect, prior to invoking the mechanism for withdrawal from the European Union, wait and see…