French Property Market Update – April 2009

A moderate price reduction but no risk of a property crash

The last market review published by the Fédération Nationale de l’Immobilier (FNAIM), which is the French National Federation of Real Estate Agents, confirmed the general trend with price reductions during the 1st quarter of 2009 but emphasise on the fact there is no risk of a property crash.

According to an internal survey carried out by the FNAIM (260 estate agents participated to it), their turnover for the 1st quarter of 2009 is down by an average 30% compared to the 1st quarter of 2008. An article published in the French newspaper “Le Monde” (mentioning the FNAIM market report and a report from the French notaires) indicates that the notaires activity in 2008 decreased by 20% compared to the previous year. The whole resale market decreased by 17%, from 802,000 in 2007 to 667,000 in 2008. New build sales dropped by 37.6% (79,400 in 2008 against 127,300 in 2007).

As a consequence, the major French property developers decided price reductions on most of their developments during the 4th quarter of 2008 and the 1st quarter of 2009 by 10 to 20%.

The FNAIM mentions that the French government took several actions to revitalize the New Build market but haven’t put in place significant actions for the resale market. This can be easily explained by the Notaire figures previously mentioned. Thus, the recent tax incentives dedicated to French taxpayers such as “Loi Scellier” have boosted the French investor market. It can be noticed by looking at the property developer quotations on the Paris stock exchange such as Nexity which has increased by 76.22% since 01st January 2009. It also explains why it is proving more and more difficult to get further discounts on New build and Off plan properties in France.

The resale market:

The financial earthquake and the brutal degradation of the global economy had an impact on the resale market, but not comparable to the one seen in the UK or the US. The number of transactions carried out by estate agents dropped on average by about 25% whereas the end of the price rise was favourable to the solvency support of the demand (+1.5% on average each year between 2005 and 2007) and compatible with the support of high level of activity, close to 700.000 transactions per year.

The property market, a slow price decrease, but no risk of a crash

Without surprise, decrease in price of resale properties was confirmed during the 1st quarter of 2009, on the apartments (- 0.4%) and houses (- 1.7%). However the decrease has been less sharp as a whole (- 1.0%) that those recorded within the 3rd quarter 2008 (- 2.9%) and the 4th quarter 2008 (- 6.5%). The transactions carried out during the 1st quarter 2009 were concluded at prices 9.8% lower compared to the sales realised during the 1st quarter 2008.

In the countryside, declines that occurred in 2008 are reflected in the prices: -7.7% and -6.1% respectively to the East and West part of France, -6.4% in the South-West, -8.8% in Centre and the Alps, -11.2% in Paris Ile-de-France and -13.3% in the South-East. With the image of the price evolution recorded on the Parisian market (- 4.9% over one year), there is no doubt that much of sellers have now agreed to moderate their asking price.

According to the FNAIM survey, 1 out of 2 sellers in France is now ready to negotiate his asking price with an average reduction of 14%. One of the reasons comes from the fact that the properties stay longer on the market: 5 months on average in 2009 compared to 3 months at the beginning of 2008. But more and more professionals now believe that prices have reached a low on the French Property Market and hope to see the end of the tunnel pretty soon, especially with the improvement of the solvency of French buyers.

The solvency of French buyers is improving

The recent interest cut realised by the European Central Bank (down to 1.5% in April 2009) has contributed to ease the lending market. In France, people can now easily get a monthly repayment mortgage at 4.25% when it was about 5.15% in November 2008. And most importantly, the recent price reductions contributed to improve the solvency of French buyers. The solvency indicator has been increasing by +5.2% on the 1st quarter 2009 compared to last year.

The impact of price decrease by 10% and of a fall by more than 60 points of base interest rates deserve to be appreciated, because these two combined falls make it possible to reduce the rate of effort of the households of about 5 points. Thus, one mortgage refused in the 1st quarter 2008 because of a rate of effort too high, is 35% more likely to be accepted today, taking into account conditions prevailing on the market!

In other words, it’s becoming easier for French people to get a mortgage and this has already brought some dynamism to the market.

2009 Forecast

These last price reductions can only be welcomed by the property market. The combination of prices reaching a low on the French Property Market, sellers ready to negotiate the asking price with an average reduction of 14% and the imminent return of French buyers on the market thanks to the improvement of their solvency, it would not be surprising to see the market picking up sooner than expected by anyone.

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Professional Land Surveyor Source: SextantProperties.com


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Eric D. Colburn, PLS, "The Geo-Business Innovator", helps geo-professionals improve through innovative solutions, mastery of marketing and business growth strategies, and coaching/training. Eric is a successful, serial entrepreneur, podcaster, industry writer, product development consultant, and RI licensed professional land surveyor.

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