France prices falling? (low activity in market)

[neustria]

Hello Monika,

I have been posting here for weeks saying that the overall economic situation in the US and Europe will necessarily take its toll on the property markets here, and that this is definitely NOT the time to invest. I think that in real estate, as with the equity markets, we will need to see some kind of "capitulation" before things begin to level out again. At this point I think that if anything, the drops are accelerating. Only Germany so far seems to be holding out in the current conditions.

The equity mrkets are a good leading indicator of economic turnarounds. They actually tend to bounce back before the economic statistics show any sign of improvement. I think that when this happens, and the upswing in the markets is durable, then that might be the time to jump in again.

As things stand now, news out of the UK, the US, and Spain suggest that this real estate downturn is going to be the most severe one in decades.

I think that the inflation factor could actually prove to be a positive for owners of real estate. House prices always keep up with inflation in the long term. So we might see a 10%-15% jump in real estate just to get back to where we were in purchasing power terms before the downturn.

[tony ben]

Has the party ended in France too, it seems to be going worldwide know.

[gfplux]

Originally Posted by neustria

In our area of the Poitou-Charentes (south Deux-Sevres) there are hundreds of properties on the market with no buyer in sight. There are certainly amongst these some good properties to be found at well under peak 2006 valuations. If you want to buy, you can take your time, in this area at least I can't see anything picking up anytime soon.

Beware of the agents who systematically paint a rosy view of the situation in order to entice you to buy. Never forget where the vested interest of the person giving you his advice lies!

As regards France it shouldn't be forgotten - it often it is here - that Real Estate had a fantastic run up from 2000-2005. Such periods, when they come, are usually very spaced out over time. I believe that the inflation provoked by the country's adhesion to the Euro played a major part in this rise, which also happened to coincide with the bursting of the DotCom bubble. To my knowledge only Germany remained unaffected, but that country had its own specific set of issues.

France has traditionally a segmented market with places like Paris and the Riviera behaving one way, remoter areas quite another. You will have to look at the specific conditions in the market you are looking at. In desirable urban high-density areas prices seem to hold up better in soft market conditions as we are seeing now.

I hope that this is useful to some of you.

Hello Neustria,
It is interesting to see your comments about your long term property hold in France. This is my experience.
I bought near Ste Maxime (83) in 1991. The value then halved during the rest of the 90's and probably reached bottom in 98. I believe the value then reached an all time high in 2006/7 of about 3 times the original purchase price. Today 2008 I believe prices are off the peak by about 10 to 20 % but as there are fewer buyers about location is everything. Property thrown up in the last few years inland from the coast in my opinion is a very hard sell at the moment.
My property is 200 meters from the sea but it is not for sale.
Good luck in Germany
Graham
Luxembourg

[neustria]

Greetings "Neighbour"!

Thank you for your interesting post. I am quite surprised to learn that prices in the Var actually fell by 50% in some areas between 1991-1998. I had holdings in Aix at that time but there, I think, prices must have held up better.

I sold an appartment in Aix in January of this year because I felt that, at best, prices were going to stagnate. I sold easily, as it turned out, but I was lucky and also the price was right. My contact there tells me that prices are now slipping.

We bought a house in the South Deux-Sevres in late 1993 and, in the following years, prices crept up. English-speaking people began moving into the area in numbers and this supported a market which otherwise was somewhat somnolent. As real estate prices in the UK outperformed almost any other European market, people began selling out there to have a taste of the "good life" down south.

Then came the boom years 2001-2006. The British arrived in droves and prices here, as everywhere, tacked on about 30% annually, if not more. By 2006 our holdings had tripled in value... The locals, of course, attributed the housig boom to 'les anglais'!

Today, the late comers to the party are finding themselves either with negative equity, or with a paper profit but with nobody to sell to. So many came and then, seemingly all together, decided that life there was getting expensive (euro appreciation against sterling) and their retirement no longer covered their needs.

We had already noticed a correlation between pound strength and UK-based immigration in the pre 2000 years, but never had the immigration been so great.

Now the British there are finding themselves (often) in a half-renovated house which is unsellable, in a country where the language poses more of a problem than most had anticipated, and where the cost of living has gone well beyond anything that anyone had anticipated. Many are choosing to tough it out, which is probably about the only option now available to them.

When we decided to move to Germany last year, it was already too late to sell. So we put long-term renters in the property and they, at least, are bringing in enough to pay off the mortage which, in early 2010, will have finally run its course.

[Monika Berlin]

Originally Posted by neustria

Hello Monika,

I have been posting here for weeks saying that the overall economic situation in the US and Europe will necessarily take its toll on the property markets here, and that this is definitely NOT the time to invest. I think that in real estate, as with the equity markets, we will need to see some kind of "capitulation" before things begin to level out again. At this point I think that if anything, the drops are accelerating. Only Germany so far seems to be holding out in the current conditions.

The equity mrkets are a good leading indicator of economic turnarounds. They actually tend to bounce back before the economic statistics show any sign of improvement. I think that when this happens, and the upswing in the markets is durable, then that might be the time to jump in again.

As things stand now, news out of the UK, the US, and Spain suggest that this real estate downturn is going to be the most severe one in decades.

I think that the inflation factor could actually prove to be a positive for owners of real estate. House prices always keep up with inflation in the long term. So we might see a 10%-15% jump in real estate just to get back to where we were in purchasing power terms before the downturn.

Thanks neustra,

I feared that much myself. I think you are right though, this looks to be the worst we have seen, at least from what I gathered while sticking my head into various news clips, forums and what not.

Waiting is good, except of course if we know a market is sound in terms of performance and outlook. But then, who would have thought three years ago that Spain would crash so dismally anyway.

[Rentoroni]

I was not aware that prices were falling by that much in France, I thought that the property around the world was being hit but not substantial is the countries more detached from the US.

[neustria]

News out of Britain is catastrophic, Spain also appears to be in the midst of something very very bad. As for the US...

French prices are down, but I am not in contact with the more recent information coming out of there. Germany, whose market got hit after reunification, didn't go up very much after that, so there, at least, the situation is better.

Europe, unfortunately these days, is not detached fro the US economy. The malaise has spead here through the banking sector, which got burned, as you know, after buying US subprime paper. The banks were therefore weakened, and getting loans for purchases is more problematic now and also more expensive.

[neustria]

The latest story to hit the equity and housing markets is the serious situation now affecting the US traditional mortage lenders in the (this time...) Prime Loan Market. Both Fannie Mae (FNM) and Freddie Mac (FRE) are now considered to be insolvant, having continued to see their revenue situation deteriorate as the housing cycle in the US spiraled ever lower. They are the largest mortgage companies in the country.

Both issue government guaranteed loans, which means that both can be expected to call on the government for help in funding. The companies are quoted on the NYSE and their unlucky shareholders will be the first victims of the current situation.

What makes this worthy of note here is that the Government was already deeply mired down in the Bear Stearns failure earlier this year, when it took a lot of nearly worthess debt on its books to make it possible for the bank to be taken over. Salvaging FRE and FNM in turn could actually affect the credit worthiness of the already alarmingly indebted United States, causing people worldwide to flee US Government paper, or forcing the US to offer higher interest rates on its bonds in order to insure their purchase. The effects of this would be incalculable.

Yet allowing the two most respected mortgage companies in the United States to 'hit the wall' would also have enormous repercussions in the Real Estate markets at home and abroad.

The slide everywhere seems set to continue, and could even accelerate...

[neustria]

In the south Deux-Sevres, in the area roughly located inside the triangle formed by Poitiers, Niort, and Angouleme, a report has it that house prices are now down by "about thirty per cent" but, even so, "nothing is selling".

Real estate agencies, which had sprung up in the smaller communities in the boom years 2000-2006, are now closing up and moving out.

French banks, like the Credit Agricole, which have been burned in the Subprime crisis, are "no longer lending".

The report concluded, "there seems to be no end in sight"

[CaroleBay]

Hi Guys

I have just received figures from FNAIM showing price per square metre and changes in prices over the past 12 months to June 2008. Interesting reading.

Some 58 towns/cities are mentioned (too many to list here), but if you would like a copy please let me know.

Kind Regards
Carole Bayliss
mortgagefrance.com