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French property: Analysis of the market

The analysis of the real estate market is derived from the French property marker report of notaires de France. It presents the real estate situation in France: trend and evolution of real estate prices.

French older properties market

At the end of July 2018, the annual volume of transactions remained high with 950,000 transactions completed in the last twelve months. Volumes of sales have peaked at between 950,000 and 960,000 transactions over twelve months since the end of 2017. As in previous quarters, two factors lead one to expect volumes to remain stable in the coming months: the aggregate volume of new home mortgages is steady and 85% of banks report steady demand for home mortgages.

The upturn in volumes reflects renewed confidence of households in response to better indicators and the upturn in the country's economy. The uninterrupted upward trend from February 2015 to October 2017 is primarily the sign of a particularly sluggish market catching up, correlated with particularly steady structural market parameters (prices that had not yet increased sharply and still very low interest rates). The proportion of sales transactions compared with available homes, up by approximately 1% per annum, is the same as in the 2000s.

However, as the Notaires observe in their surveys, volumes are falling off slightly. Prophets of doom could see this as the sign of a sharp reversal in the trend. They would be wrong. Volumes are levelling off, which all things considered is reassuring. A few years ago, an announcement of "only" 950,000 sales in one year would have caused a collective euphoria. Make no mistake, the trend to date is still positive; the fact that each new quarter no longer beats the previous quarter's record in terms of the number of sales does not mean that the situation is becoming catastrophic.

In reality the market has once again evolved. We should now expect to see sudden variations, sometimes sharp upturns and sometimes sharp downturns from one quarter to the next, affecting French towns and cities in different ways or even bucking the trend.

French property market: The moment of truth?

Volumes will decline as rise prices. Low rates, even with longer loan periods, cannot indef-initely offset this rise and the wait-and-see policy will reappear if the general economic situation in France were to show signs of slowing down.

Investing in property is still a major decision: it is reassuring, and ownership and tangi-bility make one feel secure, but it is still a costly expense both in terms of the monthly repayments on the loan or mortgages mostly arranged and in terms of the high costs of purchase.

Significant political decisions in favour of or against property in general and housing in particular, the redefinition of the rights and obligations of each player on this market and the taxes levied will influence such decisions just as much. The vote on the ELAN Act will play a part in this edifice, "impacting on supply in order to meet housing demand".

French new housing market

  • The new housing market - Key figures House building: Figures at the end of August 2018

  • Marketing of new homes - Results for the 2nd quarter of 2018

Tax rebate on property capital gains on sales of undeveloped building land or developed building land earmarked for demolition, located in so-called tense areas

Echoing the proposals of the Notaires de France in respect of measures aimed at revitalising the building of new homes, article 28 II of the Finance Act of 28 December 2017 added an additional rebate, backdated to 1st January 2018, on the tax on property capital gains on sales of undeveloped building land or developed building land earmarked for demolition, located in so-called tense areas.

This rebate is above all temporary, to encourage land owners to sell now, without delay. It will apply to all preliminary contracts of sale com-pleted between 1st January 2018 and 31 December 2020. The final deed of sale must be signed by 31 December 2022 at the latest.

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