French property values to decline according to IMF

[Sprogster]

According to an International Monetary Fund report published last week, the United Kingdom, Ireland, France and Spain have the most over valued residential property markets and the countries most likely to see an appreciable downward correction in property values over the next two years.

[woolybananasbrother]

But they are still rising in France, at least in some sectors as there is a huge shortage.

[Sprogster]

It does not matter how much of a shortage of housing there is, if it becomes unaffordable to the average person and buyers find it difficult to raise finance, because lenders require larger and larger deposits.

We may be at the beginning of a four to six year downward correction in prices, but it will take at least another year for this to become apparent as many sellers will only start reducing prices once their properties remain unsold for nine to twelve months.

[Logan]

[quote user="Sprogster"]According to an International Monetary Fund report published last week, the United Kingdom, Ireland, France and Spain have the most over valued residential property markets and the countries most likely to see an appreciable downward correction in property values over the next two years.[/quote]

That quote from the IMF should carry a health warning. Yes, in UK generally in almost all regions prices are too high, fuelled by past years of cheap easy credit. In Spain only in coastal regions is there over valued property, mostly owned by people living elsewhere. In France the overvaluation of property is very regionalised. In some departments the opposite is true. Incomes of the population are a principle factor in regulating house prices. If there is a large influx of tourists buying for second homes the market also gets distorted. There are other factors also in play.

The bland IMF quote is quite meaningless. However the basic sentiment is correct. House values are on the slide, some will fall more than others and some will stay as they are. That situation will remain until Banks can lend easy money again. When that happens is anyones guess.

[Iceni]

[quote user="Sprogster"]According to an International Monetary Fund report published last week, the United Kingdom, Ireland, France and Spain have the most over valued residential property markets and the countries most likely to see an appreciable downward correction in property values over the next two years.[/quote]

We're all right, Jack, s'not a problem for us. There are no loans secured against our house and will not be. If we ever want to move, the next house we buy will have gone down in value as well so cannot understand the fuss.

John

[Sprogster]

Logan,

I agree, in that a specific concern about French property prices is that the market in certain regions has been heavily distorted by foreign buyers in recent years. What is more worrying is to the extent that British buyers comprise the significant majority of foreign buyers. (I read somewhere that in 2006 a quarter of all house transactions in France involved British buyers!)  

If because of a combination of the credit squeeze, falling British house prices and a weakening £ against the Euro, the British buyer dissapears for the next few years, this could have a dramatic impact on the saleability of certain types of rural properties in France that seem to appeal mainly to the British. Add to the equation that the Irish economy is in trouble and we could be in for some interesting times!

My advice to prospective buyers is hold fire, as in a years time house prices will be appreciably lower. 

[Iceni]

But, Sprogster, why is the market not equally distorted by the sellers ? Surely it takes two to tango ?

John

[Benjamin]

[quote user="Sprogster"]

Logan,

I agree, in that a specific concern about French property prices is that the market in certain regions has been heavily distorted by foreign buyers in recent years. What is more worrying is to the extent that British buyers comprise the significant majority of foreign buyers. (I read somewhere that in 2006 a quarter of all house transactions in France involved British buyers!)  

[/quote]

When you are talking of foreign buyers here you can add Parisians to the list. Fortunately they are not suffering as much as other foreigners with the credit crunch.

[woolybananasbrother]

Sprogster, the British have only distorted prices in a small niche market (ie older character property). Area by area there are shortages or not and demand or not and the market is reacting accordingly. I think if one looks carefully at the numbers one will see that there was a dip in prices over th early winter which seems to have been shaken off now.

Mortgages have not yet dried up in France but then they have never been thrown about with such gay abandon as in US/UK and maybe other countries.

You may be right about some rural property which seems still very overpriced, particularly part-finished projects which have used what looks like B and Q reject materials.

[Logan]

You may notice that in my post I made no mention of foreign buyers. Whilst I agree with Sprogster that they have distorted some markets, so have Parisiens and in Spain, Madridillos. In fact you can include anyone who earns a higher income outside the zone in which they are buying. Incomes are always higher in cities and city folk long to live in the country or by the sea. However in bad times the maison secondaire is usually the first casualty. Foreclosures usually start to happen a year after an economic recession first hits. Banks move in and sell off property for their costs. That also sends the market tumbling. I am afraid it's all rather predictable. I did rather well out of the last one in Spain. 1992-1996 were good years to get into that market. Watch this space.

[Logan]

[quote user="Iceni"]

But, Sprogster, why is the market not equally distorted by the sellers ? Surely it takes two to tango ?

John

[/quote]

Sellers can only sell at the price the market allows. A house is only worth what someone will pay for it. Not a Euro more.

[Bones]

I hope the prices tumble to what they were a few years before we moved over in 2004: that'd be great! [:D]

[mint]

So far, despite my watching the housing market closely in my area, I have seen no signs of devaluation.  I was rather hoping that if a "bargain" comes on the market, I could snap it up.  There again, with the dire stirling-euro exchange rate, I am reluctant to bring any more funds over to France.

I have more or less decided, after advice from several forum members, that I will sell first before buying.  I guess that means I had better get on with the improvements to the kitchen and garden that I had planned before I decided to move![:(]

[Bones]

The thing is though that (certainly in our village) houses aren't selling.

It's the same in the UK. The houses aren't selling at current prices, in Manchester (where I'm from) I know of several people who haven't had so much as an offer over the last couple of years. They've dropped the price but still nothing. What does this tell you? That the reported drop in UK house prices is vastly underestimated. Now that the better mortgage deals are being taken off the table, buyers will be looking for even heftier reductions before they bite.

7-10 years ago you could pick up an old village house for peanuts, freshen it up, and now it's worth 2-3 times more.

Who was doing this? Foriegners. If the first victims of the credit crunch in the UK are going to be the buy to let crowd, then it follows that secondary home assetts in France will be sold off too. It's also a bonus for these folk that the Euro is so strong, when they convert the back to sterling they'll be laughing.

Sit tight. You won't necessarily lose out all that much.

[mint]

Bones, don't we live in interesting times?  Meanwhile, whilst not exactly unhappy in my present house in France, I would so love to move.

I will sit tight and wait to see which way things go, not that it's always easy to tell.  BUT, if I do see something that seems good value, I think I'll probably go for it.  Life's too short, we've all seen these cycles and up, down, every which way they go, it's good if you end up in a house you like and in a situation which is suitable to your lifestyle.

[woolybananasbrother]

Asking prices are nothing life what the real selling prices are at the moment sweet 17. You can drive a very good bargain at the moment.

[mint]

Wooly's Bro, how very NICE to hear from you again!  You're right and I know it.  Saw a house I really liked but, had to go back to the UK for family reasons, came back 3 weeks later and the bloody thing had been sold at a discount of 75 thousand euros!  

[:(] ugh.............!!!  I wish I didn't know about that.  But, thanks for the encouragement.  Will keep hunting and looking.

BTW, how are you settled in your new place?  Hope all goes swimmingly.  Is it just my impression or are houses better value in 2 sevres than in CM?

[woolybananasbrother]

Moving in ten days or so, inshallah.

Deux Sèvres is like the curate's egg, good in parts. You could find a real bargain there but might really be out in the sticks. Charente Maritime is generally a better bet though the Haute Saintonge is hideous in winter. (Or is that part of Charente?)

[NormanH]

There is an interesting 'dossier' in le Figaro at the moment about prices

http://www.lefigaro.fr/immobilier/2008/04/09/05002-20080409ARTWWW00375-special-immobilier-o-va-le-marche-.php

[Bones]

Figaro seems to be saying "er....".

It's certainly less clear as to what's going on in France and where it's heading (compared to the UK/US).

It's not like they've had a massive boom-time and now the credit crunch is going to bite.

I think if prices do drop in France then there's a chance that over time the french economy will improve and we'll see some rises.

Maybe when the energy crisis bites and France is the only one with the nucleur power stations!

Right, I'm off to Paris to buy some flats with electric heating. [:P]

edit: just read some more of the Figaro piece and one guy is saying that there has indeed been a boom that started in 2004 and prices will have to drop 45% to correct it. Yes please! But not likely imo....

[NormanH]

There has always been more of a tendency to rent in France than in the UK, and there are some interesting calculations on this in the later part of that article

I have read something similar before on the Notaires web site, where I found a sort of ready reckoner where you could calculate which was better

If you French is ok, you could consult this site which shows what the Notaires are thinking:

http://www.fnaim.fr/infos/lettre-de-conjoncture/lettre_conjoncture_N-52.pdf

[Bones]

Hasn't the tendency to rent come from waiting to have at least 10% to throw down and keeping the same house for eons?

I'm wondering how a mortgage/credit revolution in France might change all this.

Certainly Sarko would like it this way.

His dream of the English model is starting to look a little shonky the way old Blighty's heading, mind!

[NormanH]

I doubt that the "mortgage/credit revolution in France" will want to go the same way as in the UK/USA[:D]