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Will the upturn in the property market be sustained?


Does the recent and sudden increase in volumes of transactions in the past six months foreshadow a sustainable reversal in the volume and price trend? In other words, has it bottomed out?

  • Back to fluidity

    • The recovery observed since the spring of 2015, which has introduced more fluidity in the property market, is being borne out, whereas one could have thought it was a seasonal effect.

    • However there are disparities between markets and regions, some markets having become seller markets and others buyer markets.

    • Owner-occupier markets are under pressure, because of a shortage in supply. This is particularly true in the studio flat and one-bedroom market in inner Paris, or the 1/2 bedroom market in the Paris suburbs, where buyers have virtually no bargaining power, but also in certain dynamic provincial towns.

    • To sustain this fluidity, the eligibility conditions for the new interest-free loan for the resale market - in force since 1st January 2016 - should be more of an incentive, above all for properties under 4,000 euros per square metre in Greater Paris and 2,500 euros in the provinces.

    • As for investors, they prefer to invest outside the big metropolises where rental yields are higher given the prices.

    • A deceptive rise

    • The annual rise in volumes should be put into perspective.

    • In Greater Paris, over one rolling year, volumes are still 10 to 15% lower than those in the best years of the 1999-2007 period. The same figures for all departments in the French Provinces are still under 8%.

    • As for prices, while the underlying trend in the past three months is an upward one, it has simply offset the previous six months of price falls. So the prospects are fairly promising, with the beginnings of a turnaround, even though the annual trend is flat-lining.

    • A real upturn can only be confirmed if the trend continues at this pace.

  • Stop or more?

    • A set of positive factors

    • Although we cannot speak of an alignment of the planets, we can perceive a set of positive factors:
      - interest rates are still low and, should they rise, potential buyers still undecided should in all likelihood make up their minds before interest rates rise too much;
      - supply is still plentiful;
      - the economic recovery observed in Europe should inspire renewed confidence.

    • Buying power

    • Low interest rates make money cheaper and accentuate the effects of price drops, which may seem insufficient to certain buyers. Low interest rates help certain people make up their minds, as they now can afford to get on the property ladder, and help others buy a more expensive property.

    • In addition, this leverage effect is amplified by certain aids, tax incentives in particular. For instance, the Pinel law has had beneficial effects in the new-build market. One can regret however that other tax measures offset such benefits, like the rise in conveyancing costs.

    • As for investors, in view of recent collapse in stock markets, the low return on financial investments and the high risk of capital loss, we could see stock market investments being transferred to property, which is tangible and considered safer, offering the same rate of return, given the fall in interest rates.

    • The psychology

    • The French people's fondness for property has never faltered.

    • One can wonder whether we are now witnessing what we observed in 2010/2011, when the number of transactions and house prices rose suddenly. After several months of hesitancy on a market where buyers have put their purchase plans on hold to see how far prices would fall, we now see them deciding to buy more quickly given external factors (rising interest rates, house prices rising again, tax breaks), like a spring that suddenly loses its tension.

    • There is definitely a recovery, but it only makes up for the deficit recorded in the first few months of 2015; if current market conditions continue, above all its fluidity, 2016 should see a return to volumes comparable with the best years.

See also


French property market report / N°31