Slump in the Paris area

[jmpoure]

Dear American and U.-K. friends,

I am a Frenchman looking for a household in the Paris area. After hearing friends saying it was very hard to find a suitable home at a reasonable price, I took one month off to purchase a home. This seemed like the best solution to save money. I am 35 with a wife and two kids. Looking at the English market is very important for me because the London trends apply to Paris after a delay of 6 months to 2 years, as shown by a study of the INSEE: http://www.equipement.gouv.fr/statistiques...NS142-21-28.PDF

I visit 2 or 3 houses everyday. I noticed that:

1 - all the houses (except one) visited during October 2004 were not sold. This is just the converse that what was told to me in June by a friend who bought a reasonable house for 600.000 euros in one hour.

2 - sales price statistics are published after three months in France (delay to find fundings). The figures of October 2004 will only be known in January 2005.

3 - Only 600 apartments were sold in Paris in October 2004 (July 2004 sales I guess). This is not enough to define very good prices.

4 - A lot of sellers are estate agents selling their own-house. This is what rang the bell to me, as it seemed very strange.

5 - All papers from the government show that France has 23 million homes, far enough for a slowly growing population. More than 60% of estate is made of personal homes. The large homes are inhabited by 65 years old people. It seems that the French market should evolve into a mature market like the German market, were housing is very cheap (if you know Germany, you know what I mean, so cheap that it becomes too expansive to buy and spend money on the house). If you read French, the INSEE givernment study offers all information. "Viellisement et demande de logements en France": http://www.insee.fr/fr/ffc/docs_ffc/IP885.pdf

Visiting houses everyday in the area of Paris, I have come to the conclusion that most houses have dropped 15% in October 2004 alone. For example, a house was proposed to me at 240.000 euros, which seemed like a real bargain for house in the Vallée de Montmorency. After discussion with the owner, it dropped to 200.000 euros. Then I discovered an add at 190.000 euros, which means that the buyer is ready to sell it at 170.000 euros in direct. Just incredible!!! And I have of dozen of such examples. In La Celle St-Cloud, a very hype place in the Western area of Paris, houses used to sell at 600 Keuros. Now, you can find very nice ones for 450.000 euros. Just in one month.

I am still visiting houses, but not buying any longer because prices are not clearly defined any longer. Now that I look at the marked by myself, I fear a slump on the French market, which looks like "une bulle immobilière" (=estate buble). In september 2004, la Banque de France (French National Bank) issued a warning about the bubble: http://www.banque-france.fr/fr/telechar/bu...in/129edito.pdf

The Banque de France statetes that the bubble cannot hurt the French economy ... because very few households have invested in very high estate. Between the lines, it means that the real estate can drop 50% without destroying the economy.

But as an individual with a small family, only my investment matters, not the French economy.

Is it possible that the market of real estate is slumping worldwide? Could you please point out to me clear statistics from the UK or American governments on real eastate, like the ones I provided. I would not like to invest in vain, as it is seems that the French market can loose 50% in a couple of years.

Kind regards

[zzg113]

Thank you for that incredibly insightful post jmpoure.

In answer to your question:

"Is it possible that the market of real estate is slumping worldwide?"

Yes.

There are already signs of deteriorating housing markets in Australia, the UK(ESPECIALLY LONDON; this will be particularly relevant to your situation jm), the US and New Zealand, all economies which have experienced extremely high house price inflation in the last couple of years. I will begin compiling links for you relating to this over the next couple of hours.

London market:

http://www.hometrack.co.uk/index.cfm?fusea...sitem&newsid=88

UK as a whole:

http://www.hometrack.co.uk/index.cfm?fusea...sitem&newsid=86

New Zealand:

http://www.nzherald.co.nz/storydisplay.cfm...section=general

Australia:

http://www.theaustralian.news.com.au/commo...255E601,00.html

http://www.economist.com/finance/displaySt...tory_id=2736477

US:

http://www.underreported.com/modules.php?o...rticle&sid=1399

[FreekBear]

Is it possible that the market of real estate is slumping worldwide? Could you please point out to me clear statistics from the UK or American governments on real eastate, like the ones I provided.

Yes, The Economist (magazine) back in 2002 published an extensive report detailing a world wide (well, europe + English speaking world) property slump/crash was on the books. Although they figured back then it would've happened a bit sooner, their analysis is still valid.

[gone to spain]

"The Banque de France statetes that the bubble cannot hurt the French economy ... because very few households have invested in very high estate. Between the lines, it means that the real estate can drop 50% without destroying the economy."

I fear it is the British, not the French, who have paid the high prices. Therefore any falls in France will affect the UK economy.

I lived in France for 8 years. Usually it was extremely difficult to find buyers for houses because taxes are very high (frais de notaire, tax fonciere, tax d'habitation, etc). Renting was the norm unless you bought a house for life. Then the speculative Brits came along having watched too much "Place in the Sun" on tv.

Good report Jean-Michel. Let us know if you see any articles in the French newspapers about the bulle immobiliere.

[needle]

Dont forget our wonderful market in Ireland.

The legendary "luck of the Irish" is due for a severe kicking too.

The one advantage of being in the UK is higher interest rates.

In the EuroZone and US rates are too low to allow any reduction.

At least in UK there is room for manouvre.

[picnic]

The market in central Paris has slowed but in the first month of 2005 prices have risen by 1.4% in the 18th arondissment.

I was unable to find flats to buy at a price that would bring in an immediate return using a repayment mortgage.

The conclusion is that the market is at or near it's peak but that there are few signs ( in the inner Paris market that is ) that prices are going to drop from current levels.

[Bathsheba Everdene]

Any views on what's happening in the north of France, within an hour or so's drive of Calais? I've read about British people moving there and still working in England, commuting by Eurostar (or even by ferry -- can this be true?), motivated in part by the increase in house prices in the south of England. That would suggest that there might be a bubble building in the north of France, as a knock-on effect -- or are there not enough British purchasers to have any significant effect?

[picnic]

Any views on what's happening in the north of France, within an hour or so's drive of Calais?  I've read about British people moving there and still working in England, commuting by Eurostar (or even by ferry -- can this be true?), motivated in part by the increase in house prices in the south of England.  That would suggest that there might be a bubble building in the north of France, as a knock-on effect -- or are there not enough British purchasers to have any significant effect?

<{POST_SNAPBACK}>

the french are quite capable of creating their own bubble without any help from the Brits....who creat local ones known as ghettos.in the Dordogne for example,....yes people do commute...their market lags ours at present so buyer beware.....stick to a relatively liquid market like Paris ...but select where you buy there as well.

The french are changing their inheritance Laws so there could well be more property coming on the market that was in limbo B4. Increased supply, same demand....work it out.

bonne soiree

[picnic]

Interesting to note that since I posted on PARIS market in feb 05 nobody has contested the opinions.

Namely...Paris market steady and still rising strongly in parts...I will be surprised if the 18th shows rises of less than 10% for the year after 18% in 04.

So the lag probably is 2 years or so later than the London Market.....for my sins I always manage to call the top of the market 2 years too soon.

The rest of France is a different market which I do not pretend to understand. I have been all over recently and found prices at levels I would consider silly, just as I did when I last went to Wales.

[picnic]

My previous comments on the Paris market still stand. I am just going over there to work and install fire extinguishers in a 6th floor flat if the common parts are found lacking.

The french system of building management is so slow that it would take a year to get it done otherwise.

Any body else with these problems?

I have been alarmed by the recent spate of fires and sadly expect to see more.

bon journee a tout

[picnic]

So.......Average price increase for the year to July 05 was 20% for the 18th arrondisment.in PARIS ( figures supplies by the Paris Notaires )

They should start to decrease from now on so IMHO the market has peaked but no large falls will happen in the cheaper areas of Paris,simply put the capital gains will not be there anymore, but the 18th should continue to post modest gains as it is still affordable. I would expect 7 % july 05 to july 06 and 5% forjuly 06 to july 07.

Who else is watching this market ? It would seem that Impure has called the market too early.....easily done and better safe than sorry as they say.

For anybody contemplating entering the market don't forget the high costs of buying.

16 % capital gains tax makes the market a better punt than UK.

[picnic]

Just back from another trip to Paris.

1 Slight fall in the cost of renting furnished property at the 'tourist ' end of the market.

2 3% general increase in rent year on year.

3 Garages selling fast

4 More english clients (according to my local builder ) Probably old buyers rather than new ones,doing a bit of renovation.

5 Stable market in the 18th......some slowing of market in properties over 400K euros. Brits still buying at the cheaper / smaller end of the market.

I was going to start a thread about how the Paris market had NOT slumped yet.....but prefer to hedge my bets. I was interested to see how many hits the post had had, so perhaps there is more interest in the Paris market than I expected.

Sadly the cost of living there is going up and up and the quality of the food is declining.

Bon Soiree a tout.

[picnic]

Oversupply of short term furnished rentals in the more upmarket areas. Of Paris. Still strong growth and fast market in the cheaper areas 17 , 18..19..20 th arr.

See International Heral Tribune for details. As ever the press are months behind what is happening on the ground

[picnic]

bonjour a tout,

Paris ended the year with rises between 18 and 24 % in the various sectors of the 18th Arrondissment.

My gut tells me the party is over and my bank manager is convinced that rates will rise.

There was a post elsewhere about french prices, but it pays to learn all you can about a small area rather than making generalisations about a whole country.

That report can be found on www.pap.fr

I stand by my previous predictions for Paris.

If the French go on burning cars as though they were going out of fashion then I would expect the garage market to out-perform.

picnic

[picnic]

Bonjour,

Back from a recent trip to Paris.

1 Garage market fantastic. I bought a Parking in NoV 05 for 13000 euros could sell now for 18000 !

45000 cars burnt on the streets of france last year.

2 French talking about house prices....always an indicator of trouble to come even if it only means slower price rises.

3 The eastern parts of the 18th should remain in double figures for next year but not beyond methinks !

4 OFF TOPIC Chirac threatening to nuke his agressors !!!!!! I almost sold everything when I heard.

[picnic]

Well, so far all we can say is that I have been pretty on the ball regarding the Paris market in the 18th Arrondisement ( which is Montmartre basically ).

There are all the usual signs and press comments about a bubble market,in Paris, just as in the UK.

My 'agent' tells me that there is more competition in the market. This is cerrtainly true as we are in the let to 'foreigners' NOT to the 'french' sector of it.

Continue to exercise caution but I have found it a great market while London has been underperforming.

Bonne soiree a tout

Tout va bien Impure ?

[picnic]

Paris prices are still rising although at a slower rate as predicted. Recent falls in the pound should deter quite a few from buying now.

Much talk of doom and gloom in the market......prices to fall by up to 40 % etc.

All total tosh as there is huge demand, even if local people can't afford to buy. Sad but true.

Mind you I now expect stabilisation for several years which really amounts to small falls in fact after costs.

There has been a recent proliferation of house price BULLE and KRASH sites and BLOGS in the EU. Either people are jumping on the bandwagon with a view to a sale of their sites or a real indication of sentiment.

Happy easter to all.

For those of you seeking easy gains,.......Dogbox suggests Morocco and I would second his view but only for the next 2 years. After that nothing !! That is the view from the french market for what it is worth.

I wouldn't put myself at the mercy of cheap flights if you paid me . Or the Kingdom of Morroco either !!

OFF TOPIC : Long live the Politzario !

[picnic]

http://www.directgestion.fr/magazine%2Dimm...&articleid=2621

Suractiv means hyperactive /busy

So really all the posts about doom in Paris are premature.

I havn't been over for a couple of months so you will need some french to understand the article