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Housing Market In France In ‘Meltdown’ After Hollande Rent Caps

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http://www.bloomberg.com/news/2014-07-29/housing-market-in-france-in-meltdown-after-hollande-rent-caps.html

French President Francois Hollande’s government may have made a housing slump worse, pushing the construction market to its lowest in more than 15 years.

Housing starts fell 19 percent in the second quarter from a year earlier, and permits -- a gauge of future construction -- dropped 13 percent, the French Housing Ministry said yesterday.

The rout stems from a law this year that seeks to make housing more affordable by capping rents in expensive neighborhoods. To protect home buyers, the law also boosted the number of documents that must be provided by sellers, leading to a decline in home sales and longer transaction times. While the government is now adjusting the rules, the damage is done, threatening France’s anemic recovery that’s already lagging behind those of the U.K. and Germany.

“Construction is in total meltdown,” said Dominique Barbet, an economist at BNP Paribas in Paris. “It’s difficult to see how the new housing law is not to blame.”

Barbet says the drop in home building lopped 0.4 points off France’s gross domestic product growth last year and cut the pace of expansion by a third in the first quarter. Expenditure in the sector was at its lowest level ever as a portion of total real GDP in the first quarter at 4.7 percent, down from 6.3 percent in the first three months of 2007, he estimates.

Never happen here as imputed rent is far too valuable to GDP.

Although once more housing is clearly critical to boosting the recovery....

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I don't think it affects that many landlords in Paris - only those whose rents were totally off the scale. I know several people who rent in the city, in some quite prestigious areas and I don't believe any of them will be affected by the new ruling. As for the BNP having a moan, well they shot themselves in the foot with a 9 billion dollar fine.

If the French really wanted to improve the economy they'd increase the standard 35 hour contract, reduce holidays, open more shops on Sundays and Monday mornings, and would stop screwing over small businesses giving people an actual incentive to start up and even employ people - as it stands if you pay someone 1000 euros a month, then you also pay 1000 euros to the state. The economy may not be great, but I don't think the French will ever want to compromise their lifestyle, and I can't blame them.

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I don't think it affects that many landlords in Paris - only those whose rents were totally off the scale. I know several people who rent in the city, in some quite prestigious areas and I don't believe any of them will be affected by the new ruling. As for the BNP having a moan, well they shot themselves in the foot with a 9 billion dollar fine.

If the French really wanted to improve the economy they'd increase the standard 35 hour contract, reduce holidays, open more shops on Sundays and Monday mornings, and would stop screwing over small businesses giving people an actual incentive to start up and even employ people - as it stands if you pay someone 1000 euros a month, then you also pay 1000 euros to the state. The economy may not be great, but I don't think the French will ever want to compromise their lifestyle, and I can't blame them.

Bit of a contradiction there, surely? :)

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Genius banker says they happened to pass a law affecting expensive rents and that is clearly to blame for the collapse in construction nationwide.

It also explains the emptiness of cote d'azure camp sites, empty hotels in popular tourist spots, the lack of traffic in Frejus which is usually rammed solid from june to September, the lack of jobs throughout the area and the falling prices of houses in the area.

In other news, the captive giant squid, which has held up half a tentacle for the last 4 years, just held up 2 tentacles in its Central Bank based tank...bankers blame this change on rising pressure to raise rates to 2%.

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Collapse in housing?

Lower prices and sliding?

Lovely. Can I have some more svp :)

BNP complaints can be taken with a pinch of salt. They have lots of land/construction on the Cote D'Azur. Maybe falling prices aren't good for them. Boo hoo......this is the smallest violin in the world playing "My Heart Bleeds For You" .

Another 2-3 years of falling prices will hopefully see the young (ie. those under 40) getting a chance buy somewhere in their local town and put down roots. On y va !

Edited by Agentimmo

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Another 2-3 years of falling prices will hopefully see the young (ie. those under 40) getting a chance buy somewhere in their local town and put down roots. On y va !

It would need a big fall in many French towns. Paris is completely mad. I looked at a small flat at Port Royal yesterday in a not entirely unpleasant modern building. 790keuros for a 50 m.sq 2 bedroom place.

I also noticed that the flat I rented for 1000 euros/month 10 years ago is being rented out this summer, for 1500 euros/month. So much for rent caps. My old job has also become available - the salary is almost the same as 10 years ago.

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It would need a big fall in many French towns. Paris is completely mad. I looked at a small flat at Port Royal yesterday in a not entirely unpleasant modern building. 790keuros for a 50 m.sq 2 bedroom place.

I also noticed that the flat I rented for 1000 euros/month 10 years ago is being rented out this summer, for 1500 euros/month. So much for rent caps. My old job has also become available - the salary is almost the same as 10 years ago.

At 3 or 4% inflation the rent hasn't really gone up much. What is happening in France and the UK is that wages are falling in real terms whilst everything else is moving with inflation. This is so that in teh new free market globalised economy you and I can compete with a bloke in China. The process will continue for some time until the bloke in China can compete with a bloke in Ethiopia. This is why you have a UK Tory led government putting up the minimum wage they fought tooth and nail not to have in the first place.

http://www.iol.co.za/business/international/ethiopia-feels-china-s-huge-presence-1.1726932

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Not so much a contradiction as an opposition to change. The government want to improve the economy, and most the population want to maintain their more leisurely lifestyle no matter the cost.

Yes you have to admire the French for looking after themselfs and their way of life, and not being dragged into the debt trap.

Edited by awaytogo

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Just a comment about the rent controls. It is not clear they are having any effect or are really being enforced at the moment. They only apply to certain towns and cities.

There is also a way round them and this is furnished lets which are becoming much more popular (since the rent controls), at least with landlords. Furnished lets only give you a 12 month tenancy too.

A couple of other data points:

5.4 million people are registered as unemployed.

French public sector is now 57.4% of GDP, the highest level in Europe.

The gubberment is going to introduce legislation controlling what fees agents can charge from September. (hmmm might be an idea to find out why the market isn't working?)

Edited by davidg

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Just a comment about the rent controls. It is not clear they are having any effect or are really being enforced at the moment. They only apply to certain towns and cities.

There is also a way round them and this is furnished lets which are becoming much more popular (since the rent controls), at least with landlords. Furnished lets only give you a 12 month tenancy too.

A couple of other data points:

5.4 million people are registered as unemployed.

French public sector is now 57.4% of GDP, the highest level in Europe.

The gubberment is going to introduce legislation controlling what fees agents can charge from September. (hmmm might be an idea to find out why the market isn't working?)

LOL, government and their 'loopholes'

Is the french media every bit as useless/establishment as the British media, failing to mention such loopholes?

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LOL, government and their 'loopholes'

Is the french media every bit as useless/establishment as the British media, failing to mention such loopholes?

No. They are worse. The French media is like the British media circa 1958.

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If Paris prices become seine, I'll be moving there.

Wouldn't fancy risking my assets on some foreign adventure. France has a great history of social experiments which end in Les Miserables. And when push comes to shove and the Hollandes and Perons have run out of money there is always the English to soak.

Peron....she got our businesses back got the English out. Campermanvan's assets could be one place to start to fund Le Experience Sociale

Edited by crashmonitor

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Interesting take on Osborne allowing people to take their pension pots. It's suggested that In the past because a pension fund could not be turned into an asset, it was excluded from French wealth tax calculations. Now because people will have access to the money, the pension fund may no longer be excluded. Taxy taxy.

Up to now, it has been our understanding that UK qualifying pension funds can be excluded as an asset for Wealth Tax calculations, since that fund can never be turned into an asset. However, the last UK Budget proposed to relax pension rules and diversify pension options, therefore, it is less likely that exemptions will be accepted for certain forms of pension plan.

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