Why are house prices falling in Dordogneshire?

[Anton Redman]

The Spanish housing market is a huge problem because they simply built more homes than there are customers.  I also think the percentage of foreign house owners and the extent to which they have driven the market upwards will impact how much it falls downwards.  

[mint]

[quote user="BJSLIV"]

so its not surprising that the French property market is as badly affected as markets elsewhere.

The general opinion is that it would be surprising if the French market were to be as badly affected as places such as Spain or the UK. Because of the strict rules applied to French lending there was far less upwards pressure on prices than elsewhere. The properties that are more likely to suffer are ones that are part of the UK property market, but just happen to be located in France. Particularly at risk  are the ones that have been over-improved relative to prevailing French  price levels and taste.

[/quote]

"over-improved"..I hear what you are saying.  And, as you have pointed out, " relative to prevailing French price levels and taste".

I think my house is a perfect example of "pretty-pretty" improvement.  Didn't buy it for that reason, however!

From my perspective, I totally fail to see why people put in B & Q or whatever kind of a fitted kitchen in an old French farmhouse.  I personally think fitted kitchens very "suburban" and has no place in an "old pile in the country" but, I hasten to add, that that's just my own personal taste and nothing to do with what looks nice or boost the price.

What do I know?  I'm only trying to move house and bag a bargain!

[Blossom]

[quote user="BJSLIV"]The properties that are more likely to suffer are ones that are part of the UK property market, but just happen to be located in France. Particularly at risk  are the ones that have been over-improved relative to prevailing French  price levels and taste. [/quote]

Let's not be too parochial: there are also enormous amounts of Dutch and, to a lesser extent, Belgian-owned homes in France that also fit the above criteria.

[Sprogster]

The strict rules that apply to French lending, only apply to French based lenders and in recent years many of the loans granted to British purchasers of homes abroad, were from British lenders, secured as second mortgages on their UK property. 

Even where French lenders were concerned, the strict lending rules were not effectively applied to foreign buyers, as they relied on a self certification process being it very difficult to verify foreign debt. 

[Poppy]

Over the last couple of year have seen a lot of properties in the area bought by Belgians. They then seem to have done in a very short period of time a lot of renovation/improvement at what appears to be a lot of expense. Anyone know what is going on [blink]

[Clair]

I expect the political situation in Belgium cannot totally be ignored.

[BJSLIV]

Sprogster

I think we are really in agreement. My point is that the majority of the French market, IE the French, were restrained by the banking rules.

The fluffy part has always been the foreign owned sector, which , encouraged by the lax lending ,was willing to outbid and over improve on what the locals were able/prepared to do. That was fine as long as the merry go round was spinning Brits or other foreigners wanting to get off, were able to find other incomers willing to take their place. That market has stopped in in tracks. Anyone who has one of these over borrowed/ over improved houses may well face a long wait, or be forced to sell at the price  French buyers can afford.

[Babbles]

Having just sold our house, we were told it only sold because it had been beautifully restored and decorated using quality finishes and in fact the only houses that were selling were ones of this type. It was viewed by both French, Dutch, English who were only looking for quality houses according to our different agents. Builders tart ups and doer uppers arn't selling.

Yes the French do have strict rules on obtaining mortgages but its far from impossible, we are now in the process of obtaining another and have not met with any resistance so far. As far as price is concerned we did reduce to sell but so have the vendors of the one we're buying so its all about even. I think if you're selling to move up the property ladder now is a great time to buy (and sell if you're not silly about the price) It is more difficult if you're getting out of the property market, prices have fallen but whats the price of putting your life on hold while you wait for a better price? as well as the running costs of a second home.

[Scooby]

[quote user="BJSLIV"]

so its not surprising that the French property market is as badly affected as markets elsewhere.

The general opinion is that it would be surprising if the French market were to be as badly affected as places such as Spain or the UK. Because of the strict rules applied to French lending there was far less upwards pressure on prices than elsewhere. The properties that are more likely to suffer are ones that are part of the UK property market, but just happen to be located in France. Particularly at risk  are the ones that have been over-improved relative to prevailing French  price levels and taste.

[/quote]

The shortage of funds for wholesale interbank lending and the ownership of ABS's is not a problem peculiar to UK and US banks - it's a worldwide issue and has nothing whatsoever to do with individual restoration projects.

[BJSLIV]

The shortage of funds for wholesale interbank lending and the ownership of ABS's is not a problem peculiar to UK and US banks - it's a worldwide issue and has nothing whatsoever to do with individual restoration projects.

I agree that its a worldwide issue, but the effect will be particularly severe on the niche "Property Ladder" market. Just like any bubble , the frothy part of the market depended on finding the next punter who was prepared to buy, irrespective of the true value. Many Brits have created really fantastic places out of ruins abandoned by the French, and in the good times their would have been many takers. Unfortunately the absence of funding , the new feel bad factor, the increasing cost of transport, all tend to make these des res that little bit less desirable. Well placed, non OTT properties will always find a seller, but I still think the remote properties designed for the  "Place in the Sun" market will struggle.

Many people have wondered just how long the buy a ruin, spend a bit, sell it for double money machine could continue. Back in the UK the next series of Property Ladder is rumoured to include some people who actually came financially unstuck , rather than usual , despite everything they still made a packet ending

 

[Jotty]

I must be the Forum expert on falling house prices, having been caught out in negative equity TWICE in the UK (once at a period when interest rates were at 15%), and having transferred most of my money into Francs in 1996 at a time when I believe the exchange rate was even worse than today...

If anybody wants to make money watch what I do and do exactly the opposite [:D]

[Logan]

If you think property prices are falling in 24 have a look at southern Spain. Catastrophic. The reasons for both are the same. The British have stopped buying because funding has dried up.

French people have limited incomes in rural regions. The multiples of income required by French banks for a mortgage will buy very little. On average, rural incomes will buy property in the area of 100 - 130k.

That would not get you a shed in 24. However it might just get you a little pavillon concrete box. The market in period stone houses in France is and always has been Brit/Dutch dependent.

[Babbles]

In Spain its not just the that Brits have stopped buying but there is a huge over supply. Quality Period properties in excellent condition are still in relativley short supply, as I've said builders tart ups which to be have been done on the cheap won't sell now and as are ruins, but unless you are actually getting out of the property market are you actually worse off or just feel bad because of all the doom and gloom. A glimmer of hope for people who want to sell is that Brits still have the desire to live abroad and are still planning to do so even if they are not in a psoition to move just yet, maybe they might do some more research and be less likely to make a dreadful mistake[;-)]!

[WJT]

Very interesting post, we have done just this, bought a stone property in Dordogneshire and are in the middle of spending well over the odds in renovating. I am sure there is no way we could ever get back what we originally paid and what we will end up spending on the renovations. We of course could put a stop to it and finish it off at a much lower cost but it is what we want and wasn't an investment to start with.

I personally think the house deserves proper renovation in keeping with it's surroundings and age. We could have saved a lot of money and bought one of the new pavillions (that very unfortunately are popping up all around us [:(] ) but for me if that is what I truly wanted I would have perhaps bought one in Spain or even the Florida coast where we could have saved loads of money just on the exchange rate alone. [:)] The one thing that did and still does attract us to this part of France was the beautiful stone villages and architecture. I love the fact that we were able to afford an old stone property (just).[:'(]

It isn't just Brits that are attracted to houses other than the small square ones. We had French neighbours albeit not locals, they were from the Alsace region that sold a beautiful property for over a million in early spring. It was the most over done and contrived house I have ever seen. Being from the Alsace region she had all of the beams decorated with bright coloured motifs very specific to the Alsace region not Dordogne. But everything was done with such attention to detail it was incredible. For example there was an old fresco above the huge fireplace that was meant to have been restored (of which I had my doubts that was even there to start with [Www]) all the windows were replaced with beautiful iron lead light windows etc.. A really beautiful house though but with all of the extras aside just an ordinary four bedroom old stone house not a château or anything and it is in my a opinion a very bad position as well.

Just a few months later they ended up selling it in a bad market for 1.1m. The people that bought it are French from the NW of France and they bought it as a holiday home. By the way, we know about the sale from our farmer neighbour that couldn't wait to tell us because his sister was the estate agent.[:D]

There are of course many people that buy in France for investment purposes only, but there are many that just want to buy and live in a piece of French history in a beautiful part of France, not as Babs mentioned in a bad DIY bodge. The way I see it, for those that did buy with the view for investment even though times are terrible now to sell up, there are just so many old stone French properties and there are many people of different nationalities including French that they do appeal to and always will. So in that sense I consider myself lucky. Considering what we are about to go through in a few weeks time with the renovation, I have to look at this way otherwise it's off to Florida. [:-))].

[Speedy]

Whilst I sympathise with anyone with financial problems - and with those who need to return to the UK.

Here my view : like it of not!

House prices NEED to fall for the sake of our children and granchildren.

It is our generation (and in my case my parents) who allowed the 'rules' to change that consequently pushed prices into the sky!

We cannot allow prices to be 'unreasonable' , we cannot put our children in  a position where they cannot buy a house or have to take a mortgage over 30 years.

Yes I am a house owner  and if it falls in value - so be it!

[Logan]

So presumably Speedy you want the market to be heavily regulated by government?

[Speedy]

Interesting question..........regulated by the govn??

It would be interesting to know 'who' (in France) actually 'controls' the financial decison makers - my guess is although the banks implement rules - they are probably follwoing govn directives??

Anyhow, regulated yes to a small extent, but, prices must be realistic!! Do you really want to end up with 100 year mortgages like in Japan.

Have you no concern for 'our children'? - That may be un unfair way of putting it, but thats what it boils down to.

Long may the prices continue to fall.

And yes it could effect  me with 'interests' in France and the UK

[Logan]

The French property market is already heavily regulated. Much more so than the UK although that may change as a result of recent events.

In many EU countries such as France and Germany property ownership is not such an individual aspiration as the UK. Renting property is more the norm. In order to have a healthy private rental market investors need incentives. If you choke off that incentive such as capital appreciation investors will go elsewhere. That will create housing shortages which will need to be met by taxation.

Property needs to rise in value on an annual basis. Not the crazy values seen recently in UK but greater than simply investing in a bank and more than the inflation percentage.

[Scooby]

[quote user="Logan"]The French property market is already heavily regulated. Much more so than the UK although that may change as a result of recent events.

In many EU countries such as France and Germany property ownership is not such an individual aspiration as the UK. Renting property is more the norm. In order to have a healthy private rental market investors need incentives. If you choke off that incentive such as capital appreciation investors will go elsewhere. That will create housing shortages which will need to be met by taxation.

Property needs to rise in value on an annual basis. Not the crazy values seen recently in UK but greater than simply investing in a bank and more than the inflation percentage.[/quote]

I agree completely with all that you have said Logan.  The UK is not the norm in Europe with most other EU countries having a far greater rental sector.  I think increased regulation in the UK must follow the recent events - the FSA and the rating agencies have been far too lax in their approach to assessing the quality of mortgage assets and regulating the capital requirements of financial institutions and that has to change..and is changing. We have noticed a far greater scrutiny by S&P's Moody's, Fitch etc in the last few months - and about time.  

[Babbles]

Logan and Scooby, I think that about sums it up , all these old mortgage offers looked to good to be true and it turns out they were, speaking as someone who had a 125 % mortgage with Northern Rock we used it to renovate so we more than recouped our money but I think plenty of people used the extra for cars and holidays and bougt over priced houses in the first place.

[P-D de Rouffignac]

Last Sunday night's edition of 'Capital' on M6 included an interview with the president of FNAIM, the estate agents' trade body. He reported that property prices overall in France have fallen by 1 - 2 per cent each month since the spring, and are predicted to have fallen by a total of 8 - 10 per cent by the end of the year. He also said that forecasts suggest that prices will continue to fall by 10 per cent in each of 2009 and 2010, before stabilising. An 'economist' on the same programme was broadly in agreement. I suppose this is good news or bad news, depending on whether you are buying or selling, though of course many sellers are also buyers.......

P-D de Rouffignac www.francemediterraneanproperty.com

[Anton Redman]

I do not think they can drop that much and stay above the cost of building a new house, at least around here. Mind you when we bought our first house it was below build cost.

[Speedy]

Hmmm.....I do believe in market forces, but I believe more importantly in leaving'a house (and the 'world') in an acceptable 'condition' (oh would I like to make some - no lots of changes changes!!)

Houses rising at more than bank investment rates : means what ? What is a bank investment rate  : say 6 % (or is that too generous)?? So, more than that you would accept a house price rise of 10% - No, its too much!

I am glad many (not all!- I write in general terms) people are having difficulties with mortgages (yes I had the choice but NEVER took it !!) in my experience of family and friends in the building and estate agent games they regularly encountered people after a quick buck! I have worked for everything I (we - my wife has worked hard as well!) have! Thats not saying other people didn't but NO ONE should make excessive profits over what is a 'basic human need'

Houses should NOT be seen as an investment : every man has the right to a roof over his head - an affordable one!

If regulation is the solution then so be it! I don't think the 'banks' will be capable of doing it themselves , as they are only there to make money for their directors bonuses (ha ha!)

Anyhow as per the things P-D de  Rouffignac has seen  - hooray!

[Panda]

I know I'm as guilty as the next person of overusing the exclamation mark, but ending every sentence with one makes reading very difficult.  This post by Speedy must be making poor Dick Smith's head spin.

[fivecats]

In terms of home ownership in europe the Uk has an average rate of home ownership in comparison with the rest of Europe. The country with the highest rate of home ownership is Spain, followed by Ireland, Norway and Belguim.

In terms of social housing the Uk rates much more highly than France!

In France its not  the lack of mortage finance that is causing the downturn in prices but more so the cost of living and in particular the cost of petrol. With cheaper petrol individuals  in the past have not had a problem with being further from work, but the advent of more expensive petrol/diesel people now wish to move closer to their work. That's why I think prices for houses in rural areas wil fall more dramatically than in or near towns/cities.

Also the loi Robien(a buy to let scheme with tax breaks) has created vast amounts of housing where it is not needed and created large losses and a tax headache for investors who were conned into buying this type of property. For example around periguex a huge number of appartments have been built and I believe almost 70-80% of them are empty.

I think that 2009 will make 2008 seem like a picnic in the park.

P.S the banking failures of the early 1930's were caused by the fall of an austrian bank called credit anstall. I just wonder whether its the spanish banks we have to worry about?!?