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House Price Crash Threatens.... France

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beh, voila

A real estate crash threatens France

-- from Google Translate (see links below for source articles)

With rising house prices of 8.7%, France is the third most overvalued market in the world. Beware of the crash, warns Laurent Pinsolle - deploring the tax breaks that have fueled the housing bubble.

Although prices continued to rise in Paris , the property market begins to show signs of reversal in France. The question is: is there a risk of a crash , as we experienced from 1991 to 1998?

France, European champion of the housing bubble

The Economist has indeed released its quarterly index of house prices, which showed that France displays the third highest increase with a rise in prices of 8.7%, behind only Hong Kong and Singapore. The price increase has slowed considerably in China, 3.9%, as a result of numerous measures taken by the Beijing authorities . Many European markets (UK, Italy and Spain) are on the downside.

But the most worrying indicator is the assessment of prices relative to rents. It follows from this index that France is the third most overvalued market in the world behind Hong Kong and Australia. The prices are well above the 48% ratio of long-term rents. The Chinese market would be overvalued by 14%, Spain and Great Britain of 39 and 28% again, the United States have reached a certain equilibrium after a price decline of more than 30%.

Should we fear a real estate crash?

Parisian real estate market has characteristics concern: the price per square meter have increased by "only!" a thousand euros in six months , reaching a record high 235% higher than in 1998! Worse, in the meantime, the rates are raised to just over 3% to almost 4%, surpassing the full cost more to buy. Finally, the level of transactions have declined a classic sign of a market turnaround. In short, all indicators turn red .

Moreover, prices started to fall in some areas and even the Center for Strategic Analysis, which is part of the Finance Ministry , says, "their total outstanding credit (...) doubled between 1999 and 2010. (...) It now seems likely that expectations of rising house prices create a bubble on the French property market. " If long-term rates continue to rise, then the housing market could turn around fairly violently.

Un krach immobilier menace la France

More than ever, the economic situation seems unstable. Real estate markets of greatest risk. In fact, it is unfortunate to have to create as many tax deductions that only fuel the bubbles and thereby raise prices, wiping out state aid.

http://www.marianne2.fr/Un-krach-immobilier-menace-la-France_a208451.html

http://gaulliste-villepiniste.hautetfort.com/archive/2011/07/14/alerte-a-la-bulle-immobiliere-en-france.html

Edited by davidg

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This is the critical point in the article :

In fact, it is unfortunate to have to create as many tax deductions that only fuel the bubbles and thereby raise prices, wiping out state aid.

It is interesting that this point of view comes from France.

I don't know whether the original article comes from a media outlet with a left or right wing orientation but I think that they neatly described the problem that high house prices render state aid to those who need it less effective thereby imposing an extra burden on all of us.

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For the umpteenth time we find that government intervention in any market (trying to modify outcome) results in distortion, corruption and eventual failure.

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For the umpteenth time we find that government intervention in any market (trying to modify outcome) results in distortion, corruption and eventual failure.

+1

They should only regulate the structural elements of the market. Banksters are a case in point.

Edited by Blod

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There are two stories here....

1. Tax breaks creating a bubble.... this is an old one... yes, Robien / Scellier and the like did inflate the price of apartments in cities across France leading to oversupply... but these prices have already dropped and no-one is buying... the market is stagnant at best and has been for a good few years.

2. Paris property bubble... this is continuing and is in for a fall, they seem to be living in some kind of 2007 dreamland in Paris... this is not reflected throughout France by any means.

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I don't know whether the original article comes from a media outlet with a left or right wing orientation but I think that they neatly described the problem that high house prices render state aid to those who need it less effective thereby imposing an extra burden on all of us.

Right wing.

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It is interesting that this point of view comes from France.

Marianne is center left, bit like the Guardian, although overall political opinion is more statist/interventionist than in the UK. The UMP is a bit like early 70s conservatism (or NuLabor to some extent).

While Paris is a market to itself price rises have been recorded for urban areas where there is some economic life in France since the credit crunch. Ex-pats in Dordoigneshire may have had trouble selling up but in places like the Rhone-Alpes, PACA there is still a housing market esp. for properties under 300 K Euros. The whole country is still due a major correction although maybe this will be led by Paris again.

Take a city like Lyon. 2 bed flat will cost you 200K in anything but a ghetto, teachers salary around 24k/annum.

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Marianne is center left, bit like the Guardian, although overall political opinion is more statist/interventionist than in the UK. The UMP is a bit like early 70s conservatism (or NuLabor to some extent).

While Paris is a market to itself price rises have been recorded for urban areas where there is some economic life in France since the credit crunch. Ex-pats in Dordoigneshire may have had trouble selling up but in places like the Rhone-Alpes, PACA there is still a housing market esp. for properties under 300 K Euros. The whole country is still due a major correction although maybe this will be led by Paris again.

Take a city like Lyon. 2 bed flat will cost you 200K in anything but a ghetto, teachers salary around 24k/annum.

yeah, but les drug dealers earn that dans le weekend.

And for tax breaks distorting the market and putting up private rents both for private tenants and Government sponsored tenants, we too have them....treating BTL as an investment and teh mortgage costs written off for tax.

I still cant see where the "investment" part of BTL really qualifies as a business cost.....surely and investment is a gamble, not a thing to get a loan on.

Edited by Bloo Loo

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Right wing.

IT'S NOT LIKE THE RIGHT WING HERE IN THE UK THEN! Here no one is prepraed to say that high house prices are actually bad for your economy.....yet. But they will. If interest rates and lending rules had been applied properly the last 15 years, prices would only have doubled and not tripled or quadrupled. Rents would be lower, Housing benefit would be cheaper etc etc...We need a HPC to put things right! But, oh no, this Tory led govt has actually put in place a help the first time buyers to obtain overpriced new property policy. Highly dangerous and stupid and expensive and it will fail.

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IT'S NOT LIKE THE RIGHT WING HERE IN THE UK THEN! Here no one is prepraed to say that high house prices are actually bad for your economy.....yet. But they will. If interest rates and lending rules had been applied properly the last 15 years, prices would only have doubled and not tripled or quadrupled. Rents would be lower, Housing benefit would be cheaper etc etc...We need a HPC to put things right! But, oh no, this Tory led govt has actually put in place a help the first time buyers to obtain overpriced new property policy. Highly dangerous and stupid and expensive and it will fail.

yeah, but it gets votes..

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As day follows night, the French market will crash...and it will be spectacular. Hopefully better than the last one, when prices went down by 40%.

As an earlier poster said...wait till next year's Presidential election is over. Lots of blood will be spilled in the aftermath. Propping up the housing market will no longer be high up the list of priorities.

Apart from the central Paris market and a few millionaire villas on the Riviera, the market has stalled and prices are falling.

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As day follows night, the French market will crash...and it will be spectacular. Hopefully better than the last one, when prices went down by 40%.

As an earlier poster said...wait till next year's Presidential election is over. Lots of blood will be spilled in the aftermath. Propping up the housing market will no longer be high up the list of priorities.

Apart from the central Paris market and a few millionaire villas on the Riviera, the market has stalled and prices are falling.

Isn't this what we were saying on this site the year before our general election?

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This is the critical point in the article :

I think this is the culprit:

total outstanding credit (...) doubled between 1999 and 2010.

The extra 35% of the total 235% property price rises might be due to tax incentives but I think the bulk has its origins in monetary factors. As usual.

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Isn't this what we were saying on this site the year before our general election?

Possibly. But the choice at the presidential's in France stirs a bit more national debate on the direction of the country than the "love-in" between the UK's parties. The French elections for the Assembly , after the Presidential's , is more like the UK Gen Election.

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Houses are dirt cheap in France!

Excluding the inner of the big cities. Travel a few miles out of town and you can bag a four bed detached with acres of land for 100K

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Houses are dirt cheap in France!

Excluding the inner of the big cities. Travel a few miles out of town and you can bag a four bed detached with acres of land for 100K

:)

Been to Haute Savoie and Ain near Geneva recently?

100k gets you a garage.

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:)

Been to Haute Savoie and Ain near Geneva recently?

100k gets you a garage.

I've noticed that too in the Alpes but in other regions like the Midi-Pyrenees & Aquitaine prices are on the slide - have been for a few years now............

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