"French housing bubble set to burst"

[Crevette]

Stumbled accross this today.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/28/cnfrance28.xml

>French property construction plummeted 15.1pc in February and home prices have begun to slip in the first sign that America's housing woes are spreading to Europe.

>French house prices have shot up by 210pc since 1995, compared with 190pc in the US, much to the delight of 180,000 Britons with second homes across La Manche. But after years of double-digit gains the pace slowed to 7.2pc last year and turned negative in January with a fall of 0.6pc.

>"I think we will see falling house prices in France in coming months and that is going to cause headlines. It is the delayed effect of rising interests rates, which have already gone up seven times to 3.75pc, and are going up further."

Those wanting to buy may be better off waiting to see how the market goes...

-Rob-

PS: Tut the usual disclaimers of "there are big market differences for different regions" and "it doesn't matter if you don't see your house as an investment" apply!

[Monika]

We don't see our holiday cottage as an investment, just as a very expensive hobby!

[andyh4]

I can't remember how many of these reprots I have seen in the last 5 years (certainly double digits).

I guess eventually they will be right

[Bob T]

I would assume that the people who write these reports are all millionaires. If they are able to predict house prices and interest rates, then they should be employed by the big investment banks not newspapers. In reality my guess is as good as theirs.

[Dick Smith]

Not millionaires, journalists.

They operate in a world where truth has no dominion.

[Pierre ZFP]

Sometimes I'm deafened by the noise of all these bursting bubbles

[Gastines]

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[powerdesal]

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[Will]

The last time the Telegraph did anything on the French housing market, it based its research on a very small sample of French agencies specialising in sales to the English, so although the findings might be relevant to a small section of its readership (i.e. those with, or looking for, a French house above about 250,000€) it bore little if any resemblance to the wider picture.

St Malo is the nearest place of any size to this particular person - I think his place is actually nearly 20km south of St Malo, if that helps.

Is that the lovely Tracy you are referring to? The gentleman we are thinking of has a bit more in common with Norris Cole. [:D]

[alnmike]

I can relate to the 'expensive hobby' poster!!

Norris Cole eh - now there's an image!! [:D]

[Deimos]

I remember this saying about a monkey and a typewriter - the monkey will eventually write a work of Shakespeare (given enough time through random chance). I think the same sort of thing applies to these ongoing "stock" reports about gloom and doom. Keep saying it year an and year out and one day random chance will mean your report will happen to correspond to what happens in the real world.

Ian

[P-D de Rouffignac]

French house prices

I have written extensively about French prices in various forums and UK based French magazines so hope it may be of interest to share my thoughts here.

First, I don't think there is rhe remotest connection between what's happening in the USA and France. Basic research shows that some British investors have suffered in places like Florida where, after the initial rush, there is now an over supply of property, with the inevitable drop in prices. It is also starting to happen in Eastern Europe.

In France there is a similar over-supply of certain types of property such as older cottages and holiday properties, of the sort preferred by some non-French buyers, but a shortage of new-build family homes favoured by the French. New-build second homes fall somewhere between the two depending on area.

Regarding prices, they have indeed shot up since 2002/3 following the introduction of the euro (much the same as happened when decimalisation was introduced into the UK) with the result that the market, especially for second homes, has slowed down. When I talk to vendors asking unrealistic prices, their reply is that they are prepared to wait. I have to point out to them that intending buyers also can wait, as there is little pressure or urgency to move house for reasons such as a job change to another area.

As always there are regional variations (sorry!) but as a concrete example in my own area Pyrénées-Orientales, before 2002/3 typical small beachside apartments could be had for the equivalent of 25,000 euros: they now cost 75,000 euros. I am just in the process of selling mine to my neighbours who wish to add two more bedroooms, and I have had to sell at this new inflated price, as to replace my apartment I too have to pay the 'new' price. It's the typical inflationary spiral. Yet despite these high prices and high unemployment, the region is one of the fastest growing in France - and we have a shortage of certain types of property!

Hope these thoughts are of interest,

Peter-Danton de ROUFFIGNAC

[Sprogster]

Interest rates are being increased by the monetary authorities, to specifically cool down what is seen as an overheated property market and keep the lid on inflation. Therefore , interest rates in the UK and Europe will continue to be increased until there is evidence of this being achieved.

There is however one further factor that British owners of homes abroad need to consider and that is currency fluctuation and the future value of the £. Following an unusually long period of stable low inflation and resulting £ stability, many currency analysts are predicting a significant potential weakening of the £ in the next year or so. The impact of this, if it happens, on top of higher interest rates would be to considerable dampen the market for homes abroad especially those that have appealed to British buyers.  

During previous credit squeezes, second homes tend to be sold first as generally they are a luixury and not a necessity.

[Logan]

The Pound is unlikely to weaken against the Euro until interest rates in UK fall below that of Euroland. Given the higher inflation rates in UK in comparison to Europe that's an unlikely senario at least for the short to middle term. I believe house prices in France will remain stable with modest increases in the same term. Reason - as others have said here supply is not vastly out of sink with demand as in Spain for example. Also French domestic property is not over priced compared to the rest of Europe. It's for this reason that I believe the UK property market is poised for a fall of between 10 to 15% in the medium term. It will only take a small slowdown to increase supply and reduce demand. The UK property market is over priced and in my view unsustainable given weak market conditions.

[Sprogster]

Logan, if you are correct and British house prices fall 10 to 15% there will be a likely knock on effect for the sectors of the French provincial housing market that relies more on British than French buyers.

The turning point for the £ will not be when Euro interest rates are higher, but when the forex market perceives £ interest rates have peaked and the next likely move is downwards.

[Logan]

[quote user="Sprogster"]

Logan, if you are correct and British house prices fall 10 to 15% there will be a likely knock on effect for the sectors of the French provincial housing market that relies more on British than French buyers.

The turning point for the £ will not be when Euro interest rates are higher, but when the forex market perceives £ interest rates have peaked and the next likely move is downwards.

[/quote]

Yes as UK interest come down so will the Pound in proportion. As I said UK rates may fall below those of Euroland. I would then expect to see the Euro trade around 70 to 72p to the Pound. UK property buyers in France represent only a small proportion of the whole. It may have a small effect on certain types of property favoured by Brits but in general terms I don't expect much of a downturn. However this does not apply in Spain where the property market is dependent on UK buyers. I see the outlook there as dire.

[pugwash]

2 things,  first the Telegraph, much as I love it and have bought as first choice for many years, is like most of the media organisations it generally sees a smaller market than we think, and is usually based around it's home turf. so, as for the BBC as well, it is generally a South East England based opinion or guess. I have just spent nearly 8 months watching the Telegraph spin on about the housing shortage and large percentage values going on houses, when in reality in our Devonshire town my house was going down in price and we have eventually sold for 10% less than we started out for. So much for price rises.

Second, any adjustment that may be seen in the price of French houses can be nothing but a drop in the ocean compared to what should happen in the UK. With the average UK house price now higher than 5 times the average wage some "readjustment " has to happen, and I for one will put a small bet on with anyone that it won't be wages that rise high enough to redress the balance. If I can sell a 3 bed bungalow in a good size garden in Devon, and replace it with a very similar property in excellent condition in Normandy for less than 50% of the price, with 4 times the garden, then there is not much wrong in my mind with French prices.[:)]

[Logan]

Next year the highspeed rail link to the channel tunnel will open. St Pancras to the centre of Lille will take only 1 hour. I see boom times ahead for property in Northern France within daily commuting distance to London. If you compare property prices in SE Kent to NE France the difference is considerable. Quality of life with a London income, must be a winning combination.[:D]

[pugwash]

It's very difficult not to get parochial as once again London seems to get the best deal again. The rest of the country have to pay the highest rail fares in Europe, on what can be less than good service to get to London, but Londoners have a high speed service to Paris.

[cooperlola]

The UK pays the highest fares, our railways are more concentrated in a smaller area than anywhere else, and yet still they are over-subscribed and under-funded.

I wonder how much a season ticket from St P to Paris costs for a year?  Once you get to Lille or Paris, how many small towns have local stations for onward journeys?  Could be quite a commute although I'm sure there will be some who will give it a go.

[sclarke2208]

Anyone wishing to relocate to the North of France can read an article in todays Daily Mail promoting all that is good about Pas de Calais and the fact that Eurostar starts its new run in November this year. I guess I had better hurry up and get my house over there (been looking for 6 months at properties that are very affordable) and I don't want to see a huge price hike.

roseysan

[cooperlola]

And you'd be surrounded by Daily Mail readers of course.  Whether this would be a good or a bad thing is of course up to the person concerned.

[Logan]

[quote user="sclarke2208"]

Anyone wishing to relocate to the North of France can read an article in todays Daily Mail promoting all that is good about Pas de Calais and the fact that Eurostar starts its new run in November this year. I guess I had better hurry up and get my house over there (been looking for 6 months at properties that are very affordable) and I don't want to see a huge price hike.

roseysan

[/quote]

You had better be quick. Immos in the region are selling out and also predicting a boom. Prices are already rising. Those who bought a few years ago in the Pas de Calais have done well. An annual season ticket from Lille or Paris to London will cost less than you think. SNCF is not Virgin Trains. Very different structures.

[pugwash]

A good or bad thing to be surrounded by Daily Mail readers ?  is that what you mean ? I can imagine being kept up at night by the gnashing of teeth, and the beating of plough shears into swords.

[cooperlola]

[quote user="pugwash"]A good or bad thing to be surrounded by Daily Mail readers ?  is that what you mean ? I can imagine being kept up at night by the gnashing of teeth, and the beating of plough shears into swords.[/quote][:D]