As was expected, the latest report from the Notaires de France paints a bleak picture for the French property market. However, is this all doom and gloom for the British buyer who wants to buy a home in the Languedoc? Lets take a look…..
The French property prices for 2014 in a nutshell
The downturn is pretty much nationwide with the average across the country for older properties (non new builds) is running at a further 2% drop on the previous year for apartments and 0.6% for houses. However, some areas have seen a drop of over 20% and some small pockets still continue to grow.
New Builds effect on the market
The combination of the *Pinel scheme and the extension of zero rated loans was expected to have a beneficial effect on first time buyers and therefore an upturn for 2015 was widely expected. However, as the supply of new builds is now out of step with demand in terms of volume, location and prices means this housing recovery plan has not had the desired effect. Therefore, the upturn is not now expected until 2016.
Older properties overview
The Notaires de France reports that vendors are now reluctant to put their property on the market unless they are forced to in circumstances such as divorce, changing jobs, or even a job loss. This means there is a scarcity of properties coming onto the market currently, especially properties which have had extensive renovations, as owners are not sure they’ll manage to recoup their costs.
Supply and demand
Some of the larger towns and cities are seeing a small growth where demand is definitely outstripping supply. The towns singled out in the Notaire de France report are Toulouse, Nice and Nantes but from a more detailed analysis of this report it’s clear that Montpellier and Sete also fall into this category. Perpignan on the other hand has seen a sharp fall in house prices over the past year. So a very mixed bag.
French Property sales
Overall for 2014 the number of transactions of 707,000 for metropolitan France is on par with a year ago.
Period of ownership
Another statistic that ties in with the older properties overview is the of period of ownership. This has been getting longer in France and over the past 2 years it has risen from 9 and a half years to nearly 11 years for apartments and from 11 to 12 years for houses. This could start to have a positive effect on the market, as demand starts to outstrip supply.
Some good news! Interest rates continue to fall and at the end of November the long-term fixed-interest mortgage rate was at 2.70%.
So what does this mean for British buyers
One train of thought is to hang on to your cash, as prices are likely to fall even further during 2015 . However, we also know that owners are even less keen to put their property on the market and more so if they’ve spent a lot of money on renovations. This means that there are fewer ‘turn-key’ type properties available and of those that are coming on the market in my view are ones where the owners will be holding out for a better price, so will be far more difficult to negotiate with.
On the other hand and from what I’m seeing, there are a lot more renovation projects available and this combined with low interest rates and extremely good sterling/Euro exchange rate, means there will be some great bargains to be had if you don’t mind taking on a project.
Your French home, like all investments should be viewed over the long term and the general consensus is that whilst French house prices are anticipated to fall over the coming year between 2% and 3%, the falling prices are slowing down and demand in the popular areas is already outstripping supply. Therefore, haggling for a lower price will become ever more difficult as the French property market starts to recover towards the end of 2015 into 2016.
If I were buying a home in the Languedoc right now, and to be honest I wish I were, I’d be looking into locking down my exchange rate for a year if possible, thus giving me the best exchange rate we’ve seen in the past few years, combined with time to find the perfect property whilst prices are still dropping.
French property prices – final observation
One final point to note is that whilst we’ve been focused on the French property price reductions over the past 3 years, they are now in fact hitting the levels they were in 2007, which was still a huge increase on the market prices of 2004. In fact leading economists Xerfi predict the latest falls will take the overall 5 year average (2012-2015) to a total fall of 5.5%. This, as they point out is a modest fall given that French property prices have increased by around 150% over 19 years. Meaning French property investment was and is still good for the long term investor but has of late been more risky for the short term speculator.
*Pinel scheme – (dipositif Pinel) was created promote affordable housing and allows French taxpayers who purchase a new home or building from 1 September, 2014 onwards to benefit from a reduction in their income tax. There are quite a few clauses and stipulations and the building must meet the energy and thermal regulations and economic standards.
Here’s a more in depth property price analysis for the Languedoc by Department and town.