Is the French housing market in trouble again?
By Steve Binge

Is the French housing market in trouble again?

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There may be trouble ahead for French property, with reports suggesting key indicators fell throughout 2012. The Global Property Guide reported that the country is struggling to bring down its sky-high unemployment rate and budget deficit. This is harming the health of the real estate market and the National Institute for Statistical and Economic Studies has noted a 1.63 per cent fall in house prices in Metropolitan France compared to 2011 levels - the third consecutive year of annual declines. According to the news portal, when adjusted for inflation values dropped by 3.12 per cent, with a 1.27 per cent quarter-on-quarter rise in Q4.

However, it isn't just prices that are feeling the economic backlash. Data from La Chambre des Notaires de Paris has shown that sales volumes also took a tumble in 2012. Throughout France, 709,000 homes were sold last year, a fall of 12 per cent year-on-year. The rental market is also suffering, as investors lose their confidence in light of new regulations. The Duflot Act and the new device rental investment rules haven't yet made their impact and there is fear rent regulations will tighten further. What's more, the chance of short-term gain has all but vanished.

As in most of Europe's property markets, first time buyers have remained constrained in France. According to La Chambre des Notaires de Paris, this is due to the end of the loan to zero ratio. The percentage of transactions by purchasers under 30 years decreased in 2012, standing at 15.8 per cent of all sales. However, interest by foreign buyers has remained stable, showing that despite economic conditions, overseas markets are proving resilient across Europe.

So what can be done to change the fortune of French property? "Vendors must adjust their prices to the solvency of buyers," La Chambre des Notaires de Paris said in a statement. Continuing to price real estate too high will limit activity and cause the sector to weaken further.
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