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France Faces 40Pc House Price Slump


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#1 thecrashingisles

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Posted 04 May 2012 - 07:40 AM

http://www.telegraph...rice-slump.html

Graph of price to take-home pay is striking

Posted Image

"It is a gigantic bubble, all the more dangerous as it is spread across France," said Pierre Sabatier, from the consultancy PrimeView.

"It reached a paroxysm in the summer of 2011. There is a mix of incredulity and denial as it starts to burst but there can be little doubt that all levers propelling the market are disappearing."

PrimeView said prices across France have jumped 160pc since 1998, though houshold incomes are up just 35pc. Paris has overtaken New York to become the world's third costliest city at 18,000 (14,600) per square metre.

Standard & Poor's has told investors to brace for a 15pc correction. Credit Agricole says prices may fall 12pc by the end of next year, expecting a "gradual slide" that could last until 2016.

PrimeView thinks it will be much worse. The price-income ratio was stable from the 1960s to the late 1990s, before exploding over the past 12 years as a perfect storm of demographics, state sweetners and cheap credit led to a 12-year blow-off.

There are parallels with Spain and America but Mr Sabatier said the French twist is a replay of the early 1930s when investors fled stocks after 1929 and rotated into "safe" property. Hence the paradox of rising prices during the Depression. The strange boom did not end until premier Pierre Laval cut rent ceilings in 1935, triggering a long slide.

"Laval's policy change was the catalyst. The same could happen now as austerity forces brutal measures," he said. An array of market props are eroding, including tax relief on some mortages and certain capital gains.



#2 Frank Hovis

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Posted 04 May 2012 - 08:01 AM

That looks familiar :)
High house prices - wrecking economies worldwide since 2003

#3 Snafu

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Posted 04 May 2012 - 08:09 AM

That looks familiar :)


A couple of years ago I would have said "they will crash". What I've learn from the UK though is that the powers that be will try their damndest to avoid it. But then again, maybe that's only the UK.

#4 madpenguin

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Posted 04 May 2012 - 08:13 AM

The bubble covers a lot of developed European countries for the same reason, international availability of cheap credit before the crash.

How many people with 200 grand mortgages now would have got them 10 years ago in the UK?

Edited by madpenguin, 04 May 2012 - 08:15 AM.


#5 Frank Hovis

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Posted 04 May 2012 - 08:35 AM

A couple of years ago I would have said "they will crash". What I've learn from the UK though is that the powers that be will try their damndest to avoid it. But then again, maybe that's only the UK.


But.. see below

The bubble covers a lot of developed European countries for the same reason, international availability of cheap credit before the crash.

How many people with 200 grand mortgages now would have got them 10 years ago in the UK?


Therein lies the answer as far as I am concerned, specifically how many would get them now. The buyers are not there as a consequence. So you have a period of low transactions before the market starts seeing significant resets. As has been said before prices are set at the margins, with the transactions that are actually happening, not by the asking prices of those unwilling or unable to reduce their selling prices and hence don't sell.
High house prices - wrecking economies worldwide since 2003

#6 Democorruptcy

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Posted 04 May 2012 - 08:40 AM

The bubble covers a lot of developed European countries for the same reason, international availability of cheap credit before the crash.

How many people with 200 grand mortgages now would have got them 10 years ago in the UK?


I wonder how much the UK bubble is to blame? People buying second homes all across Europe. The Irish had their own Place in the Sun type program.

Democorruptcy
If you say "Democorruptcy" quickly, it sounds a bit like "Democracy". In a "Democracy" people vote for politicians who represent their interests. In the UK's "Democorruptcy" people can only vote for expense fiddling thieving MPs who are in the hip pocket of big business and the finance sector.

Governbankment
A "Governbankment" is a Government that has no line between itself and banks. It diverts public money (our taxes) to private companies (banks). George Osborne's Help to Buy Bail Banks, will see our taxes go to bankers to cover their losses on mortgages that default. The UK's Governbankment will even pay bankers "reasonable repossession fees" on Help to Bail Bank mortgages that default.

The Funding for Lending Scheme (FLS) is stealing from savers to make them pay for crimes by bankers. Via lower interest on savings, all the bank fines for PPI, LIBOR, interest rates swaps, etc. are being paid by savers so that bankers can keep pocketing bonuses. 

"We need to make a really big change: from an economy built on debt to an economy built on savings" - David Camoron Jan 2009
"Printing money is the last resort of desperate governments when all other policies have failed" - George Osborne Jan 2009
- So what do Camoron & Osborne do? Print money and leave interest rates at 0.5% when inflation is over 5%

If it is asserted that civilization is a real advance in the condition of man -- and I think that it is, though only the wise improve their advantages -- it must be shown that it has produced better dwellings without making them more costly; and the cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.
http://classiclit.ab...en-Part-2_4.htm

I want to tell you my secret now.... I see debt people


#7 Snafu

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Posted 04 May 2012 - 08:41 AM

Frank Hovis: I am just getting turbo-cynical. I hate it.

#8 aSecureTenant

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Posted 04 May 2012 - 08:45 AM

Glad I got out in 2010.

"Capitalism has defeated communism. It is now well on its way to defeating democracy" ~ David Korten

“To think output and income can be raised by increasing the quantity of money, is like trying to get fat by buying a larger belt” ~ John Maynard Keynes 

 


#9 Frank Hovis

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Posted 04 May 2012 - 08:46 AM

Frank Hovis: I am just getting turbo-cynical. I hate it.


I appreciate that Sanfu, I think we're all a bit exasparated that the Labour government encouraged the credit bubble and then the Coalition are trying to keep it bouncing along. IMO there is now a glacier-like inexorability to a HPC (real-terms anyway) as both available cash (though rising unemployment, low wage inflation and high price inflation) and available credit (lower LTVs, IOs being dropped, no liar loans) continue to contract. So savvy buyers hold back and mug buyers are saved from their own stupidity.
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#10 corevalue

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Posted 04 May 2012 - 08:50 AM

An HPC would cost the French government dearly. Don't they have relatively low property taxes, but collect a much larger tax take on exchange?
When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. John M. Keynes

#11 campervanman

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Posted 04 May 2012 - 09:28 AM

An HPC would cost the French government dearly. Don't they have relatively low property taxes, but collect a much larger tax take on exchange?



We paid a total of about 4k euros in legal fees and stamp duty on our French property purchase in 2007. We only paid 75k euros for the place though :).

Still not young enough to know everything

 

_57919089_share_income464x332.gif


#12 davidg

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Posted 04 May 2012 - 10:56 AM

An HPC would cost the French government dearly. Don't they have relatively low property taxes, but collect a much larger tax take on exchange?


They did have lowish property taxes but they've gone up a lot, as much as in the UK in some cities. Stamp duty is around 7% but as few properties are selling at the moment I'm not sure that is a big factor, one of Sarkozy's ideas was to scrap or decrease this tax as it is seen as an impediment to mobility.

#13 swissy_fit

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Posted 04 May 2012 - 12:46 PM

This French price crash, if it happens, will be localised, as in the UK.
Properties in France but near Geneva are priced based on at least one of the people living at the property working in Geneva (thus earning a lot more) and the mortgage being in CHF at a lower rate of interest. Can't see Geneva crashing anytime soon, so I doubt if the French prices will drop either.
Places in the middle of nowhere may return to their real value though. (about 35-40% of their current value IMO).
If you want to know what the next political move will be, ask yourself what will suit the banks, and behold, the answer will come to you.

The Credit Crunch :
The logical financial outcome is deflation. The logical political outcome is inflation. (Thanks to Injin 21st Sept 2008)

#14 Democorruptcy

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Posted 04 May 2012 - 01:00 PM

This French price crash, if it happens, will be localised, as in the UK.
Properties in France but near Geneva are priced based on at least one of the people living at the property working in Geneva (thus earning a lot more) and the mortgage being in CHF at a lower rate of interest. Can't see Geneva crashing anytime soon, so I doubt if the French prices will drop either.
Places in the middle of nowhere may return to their real value though. (about 35-40% of their current value IMO).


We have some friends with a house and 2 gites in the middle of nowhere. They put it all on the market 2011 and recently got a "very good offer" but decided to turn it down and stay in it. They were going to stay in France but buy smaller. STR opportunity?

Democorruptcy
If you say "Democorruptcy" quickly, it sounds a bit like "Democracy". In a "Democracy" people vote for politicians who represent their interests. In the UK's "Democorruptcy" people can only vote for expense fiddling thieving MPs who are in the hip pocket of big business and the finance sector.

Governbankment
A "Governbankment" is a Government that has no line between itself and banks. It diverts public money (our taxes) to private companies (banks). George Osborne's Help to Buy Bail Banks, will see our taxes go to bankers to cover their losses on mortgages that default. The UK's Governbankment will even pay bankers "reasonable repossession fees" on Help to Bail Bank mortgages that default.

The Funding for Lending Scheme (FLS) is stealing from savers to make them pay for crimes by bankers. Via lower interest on savings, all the bank fines for PPI, LIBOR, interest rates swaps, etc. are being paid by savers so that bankers can keep pocketing bonuses. 

"We need to make a really big change: from an economy built on debt to an economy built on savings" - David Camoron Jan 2009
"Printing money is the last resort of desperate governments when all other policies have failed" - George Osborne Jan 2009
- So what do Camoron & Osborne do? Print money and leave interest rates at 0.5% when inflation is over 5%

If it is asserted that civilization is a real advance in the condition of man -- and I think that it is, though only the wise improve their advantages -- it must be shown that it has produced better dwellings without making them more costly; and the cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.
http://classiclit.ab...en-Part-2_4.htm

I want to tell you my secret now.... I see debt people


#15 JaneTracy

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Posted 04 May 2012 - 01:17 PM

Thanks for the original link which looks both ominous and familiar. It also feeds in with an article that I was reading about the state of the French economy which appears to have taken a lurch downwards.

What about France ahead of her election?

We even see France slipping into trouble with this set of data. Indeed her service sector appears to have shrunk at the fastest rate of all.

Final Markit France Services Activity Index at 45.2 (50.1 in March), 6-month low.

A contraction in this index of 4.9 is not something that is likely to have gone down well with the breakfast coffee and croissants at the Elysee Palace this morning. And we can add in this weeks manufacturing numbers which I reported on Wednesday.

Final Markit France Composite Output Index at 45.9 (48.7 in March), 6-month low.

So the manufacturing figures which we thought were poor end up improving the overall index and we end the week with the Euro zone having taken several heavy economic punches. In France itself there is at least some hope that the figures have been influenced by her election.


http://www.mindfulmo...pain-and-italy/

Should the French economy continue to weaken then it will put considerable pressure on house prices in France.




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