subprime crisis

[rav4]

Does anyone knows if if the subprime crisis in the US have or not affected property prices in France. Is now a good time to buy? if I buy it will be a retirement home.

Any productive input is welcome.

Thank you.

rav

[PaulT]

Depends what currency you are going to use to buy. If it is Sterling then it is very poor against the euro - 13 months ago something like 1.52 euros to the pound now 1.33 euros to the pound. So expensive to buy now.

[PaulT]

Just to add - be careful about what it says on Immobiliers sites. Just looked at one and there is still a property for sale that we looked at 20 months ago. Then it was priced at 240,000 euros. Today it is billed on the site as 'NEW' and a price of 192,000 euros. The impression is that it has just come on to the market.

It seemed to me that French houses are so different it is hard to get a feel as to what the real value is.

In the above example, which we did have a second look at, if we had been interested then we would have been offering based on the 240,000 asking price. Today we would be offering based on the 192,000 asking price.

Perhaps the art is to watch the immobilier sites in the area you are interested and watch what happens to the properties and then start the inspections.

Paul

[Logan]

The sub-prime debacle has affected the property market almost everywhere. If you are a cash buyer, by that I mean no property to sell, not needing finance and can move quickly the cards are all in your favour.  Many property owners are in distress and will slash the price drastically to get a sale. My advice is to wait a few months longer. I expect Sterling to eventually recover slightly and house prices to collapse further. I have just returned from Spain and did some market research. The market there is wobbling on the edge of a cliff and the prospects dire as folks try to get out from under. Professionals of course have the brave sales face on. Most of them are paddling like crazy under the water line. It’s not that bad in France yet but it isn’t good either. Do not listen to Agents do your own research both on line and in the country talking to sellers and buyers. There are good bargains to be had but you need to do the leg work first.

[Panda]

There are properties on some of the AngloInfo type sites that have been around for years now not months.  I noticed that they've started to only show 6 months previous postings on the property for sale section and would suggest this is a direct result of people trying to sell wanting to make it look like a new property as per the post above.   I agree with logan, hang on until the pound gets a little stronger as the housing market looks set to decline further.

[dexter]

Another thing to be wary of is the state of the UK market at present, If you intend to buy on the capital raised from the sale of a house in the UK this could take longer that expected. My situation has been well documented within the forum, and to cut the story short, four and a half months on the market not one viewing `in a much sought after blah blah blah` as the estate agents say.

[Gluestick]

Interestingly, for professional purposes I recently carried out an analysis of both the European and in particular French mortgage markets.

France seems rather well insulated from the Sub Prime idiocy, since whilst French banks and lenders may indeed use securitisation in mortgage activities, the actual lending process is still strictly controlled by overall statute on personal borrowing capacity. Which has limited the downside; very sensibly.

My own observation of the French property market, is that typically desirable second homes (from an incomer's perspective: meaning tumble down old farmhouses needing tens of thousands of Euros of expenditure in renovation) are static; whereas the typical properties favoured by indigenous French purchasers are roughly in line with the economy.

Quite obviously, Brits selling their desirable des res at top of a booming and out-of-control market has stalled for now.

The low Sterling to Euro exchange rate clearly doesn't help.

Many of the protypical Brit buyers I have met in the past six years were downsizing their UK residence and buying their "place in the sun" with possible potential as a retirement abode.

This seems now to have almost totally dried up.

The Spanish market always was a two-tier affair: villas and appartments near the coast for incomers: and sensible everyday houses and appartments in towns for Spaniards.

The current initiative of threatening demolition of all illegally built coastside properties is quite obviously not an inducement for new buyers to feel comfortable!

Few of such properties have been purchased by Spaniards: mainly Brits, Swedes and Germans.

 

 

[groslard]

You might like to consult

http://www.propertysnake.co.uk/

which seems to confirm what dexter says.

I also agree with gluestick, but would add another factor.

Old properties are not much sought after by the French, and prices are in decline but as he says the new-build market is firmer.

What makes a difference as always is location. There is a 'baby-boom' in France too, and many of these people who have worked in the Ile de France are now looking to retire to the South, so even if  British buyers are fewer, the French are keeping the market active' especially for new 'villas'.

[Logan]

The problems for the property market in Spain are many. They range from sub-prime fall out, usual market trends and over capacity, previous easy credit and the fact that massive new building projects along the coastal strips have stalled and are being sold off by developers at prices way below those of the resale market. Spanish banks who have lent massively to fund these projects are getting very nervous. In France there is a glut of building land and easy planning permits in most regions. New build properties can be bought at a price way below the cost of doing up an old wreck. As Gluestick correctly states these properties are very desirable to French buyers because in part they are affordable. Old properties are cheap to buy but prohibitively expensive to restore in comparison to new build. However those with the skills, energy and time to restore an old house themselves have an advantage. I agree the French market is well placed in comparison to UK. Here much pain and blood on the carpet awaits those owners who bought at the top of the market and over borrowed. This market in my opinion has a long way yet to fall. We are now entering a medium term period where houses are simply somewhere to live and not a means of making money. That should allow those currently unable to get a foothold on the property ladder a chance. Then long term the whole inflationary process will start again. 

[Ian]

Hi Rav - and welcome to the forum.

Crazy lending has never really been French banks style (self certified mortgages, massive multiples of income and buy-to-let booms are discouraged here) and for this reason the sub-prime crisis will hit less in France than in other countries such as UK.

But the global downshift of confidence will no doubt have some impact here.

I feel that exchange rates, as discussed above, will have the larger effect.  Sterling has lost significant value over the last 12 months and so has the dollar against the euro.

Predicting future currency movements is difficult (near impossible) so deciding whether buying now is better than leaving it 6 months is equally difficult.

Without doubt, on the whole property in France still represents a substantial bargain when compared to equivilant property in the UK (and if you go far enough south the weather's better too). I'm not sure one could say the same compared to US real estate.

Will French property still look cheap compared to UK property in 5 years time? Who knows?

If it is to be your future dream home, and you find your ideal property, and you can comfortably afford it today - then go ahead and buy it.  Homes and happiness are long remembered after you have forgoten that if you had left it 27 weeks (or whatever) the exchange rate would have bounced more in your favour.

If you are after a quick few bucks (euros) saving on a shrewd investment that you have no emotional attachment to (this doewn't sound like you) than speculating in French property is in my opinion risky.

Best of luck

[groslard]

From a link on Claire's newspaper site:

"Les ventes de maisons individuelles ont baissé de 5,2% en France en

2007, avec 196.143 unités vendues, a indiqué mardi l'Union nationale

des constructeurs de maisons individuelles (UNCMI). L’année dernière,

seul le marché de la région du Centre Est est resté en croissance, à

+4%. Tous les autres ont baissé, parfois sérieusement comme

l'Ile-de-France (-11%), l'Ouest (-8%) et le Nord (-7%). La baisse est

en revanche plus limitée dans d’autres régions comme la Méditerranée

(-3%), l'Est (-2%) ou le Sud-Ouest (-1%)."

(L'Expansion.com)

This says that house sales have fallen 5,2% in France en

2007, and quotes regional variations

[Ian]

Of course if you are climbing the property ladder, property price falls are a good thing.  Every cloud ....

[Benjamin]

A couple of questions from this report groslard.

As they are the National Union of House Builders are they only talking of new properties? If so, then are they talking from the prices that their new properties are now as opposed to the prices they achieved for them in the previous year?

The other point to make is that in general terms the average French family does not buy and sell with the same frequency as the UK market. Thus prices go up and prices go down and over time they level themselves out. Of course if you're a Brit and you want to get out of the French market completely then perhaps now is not a good time to be doing so.

[groslard]

[quote user="Benjamin"]A couple of questions from this report groslard.

As they are the National Union of House Builders are they only talking of new properties? If so, then are they talking from the prices that their new properties are now as opposed to the prices they achieved for them in the previous year?

The other point to make is that in general terms the average French family does not buy and sell with the same frequency as the UK market. Thus prices go up and prices go down and over time they level themselves out. Of course if you're a Brit and you want to get out of the French market completely then perhaps now is not a good time to be doing so.

[/quote]

I think they are talking of volume of sales of new houses, as opposed to prices..

[Benjamin]

Thanks for that clarification. I'd clearly mixed that differentiation.

[Logan]

[quote user="Ian"]

Predicting future currency movements is difficult (near impossible) so deciding whether buying now is better than leaving it 6 months is equally difficult.
[/quote]

I believe you can predict currency movements to a certain extent Ian. In doing so it's important to look back at Sterling’s historical trends against European currencies. You will find a pattern there. The present falls seem to have settled around a trading band of 1.32 and a high of 1.345. That is 8.65 FF to 8.82FF. Very low historically but not without precedent. In 1992 Sterling fell to 7.20FF! I think barring major economic calamities in UK it is unlikely Sterling will fall out of this band. In other words it's reached its natural level for the current market conditions. So as market conditions improve and interests rates start to rise to combat inflation already in the system so Sterling should also rise. Economic growth in the Eurozone is slowing and interest rates should fall weakening the Euro. So buy as Sterling returns to previous levels and when house prices have bottomed out.

Our poster would be well advised to consider these unemotional aspects to purchase in France if he wants to save himself several thousand pounds. I agree with your sentiments about ‘home and happiness’. However those things are just as well enjoyable with a few quid left in the bank.

 

[Ian]

Very true Logan - if I can get something a bit cheaper, I'm all for it.

I too would guess that sterling should strengthen against the euro - but I'm no Bill Lipschutz when it comes to currency trading ... and if I were I'd have made so much money for it to no longer matter what the exchange rate is.

[woolybananasbrother]

There are houses being sold round here to Brits but the prices have all been adjusted sensibly. Thus properties up to say 240/250 seem to be selling quickly just under 200, which, having seen the odd one, seems to be a realistic figure.

[Gluestick]

Forex markets are extremely edgy and fickle at the moment.

If the Bank of England's MPC bow to government pressure and foolishly reduce base rate, then sterling should dip against the Euro.

However, if the ECB reduce rates (as they should: the high Euro rate is crippling exporting Euro industry), then sterling should gain .

Technically, the MPC ought, of course to raise base rates since inflation is out of control.

Interesting that despite the B of E's adding liquidity to the money markets LIBOR is still very much bid: and not much offered!

Also interesting that despite the Fed's special discounted rate of $50 billion extra banking liquidity, US banks aren't lending either!

I would not take any bets on Forex at present!

 

[Iceni]

For some years the govt/MPC seem to be have used just one device to control inflation, interest rates. During that time personal debt has reached horrendous levels so whatever happened to good old money supply control (M1 ?) ?

Except of course GB seems happy to have a country's economy built on the bubble of house prices funding foreign made consumer goods.

John

[Gluestick]

Aha!

A man after my own heart, John!

Using Base Rates as the sole moderator always was an idiot concept. Using other mechanisms (such as Special Deposits AKA The Corset) is much better.

IMHO the B of E ought to have invoked the Corset some years before unsecured personal loans reached their epidemic proportion.

But then again, if both the B of E and the FSA had have been doing their jobs properly, the Northern Rock fiasco would never have happened since they would never have been allowed to build up such a negative liquidity position, if their Liquidity Ratios had been kept in balance.

You and I John are obviously monetarists: like the late Milton Friedman.

 

[Scooby]

[quote user="Gluestick"]

the Northern Rock fiasco would never have happened since they would never have been allowed to build up such a negative liquidity position, if their Liquidity Ratios had been kept in balance.

[/quote]

I think it was borrowing short to lend long that killed them...

[Iceni]

[quote user="Gluestick"]

You and I John are obviously monetarists: like the late Milton Friedman.

[/quote]

Generous of you to say so Gluey - I prefer to think of it as expressing common sense, a rare commodity this century.

John

[Gluestick]

Agreed, Scooby.

Trouble is they have all been at it!

Perhaps the first casualty of this insanity was Chicago Illinois back in the mad 80s.

They were trying to balance their loan book in the global interbank market in precisely the same way.

That said, I twitched - considerably! -  when Northern Rock first announced their 125% LTV deals with 6+ times income!

The core weakness was that they were "Gunslingers", determined to build a huge edifice on sand.

Guess what?

 

[woolybananasbrother]

As things stand then, Northern Rock is now the safest bank around for depositers?