Interview of Jean-François GABILLA - 15 July 2008
- Are property prices actually falling?
- Is the situation the same in all regions of France?
- Is the rise in oil prices having any effect on property prices?
- Is the current situation in the French property market at all comparable to what is happening in the UK, US and Spanish markets, where prices are falling?
- Isn’t it the case that lower prices for new property mean lower quality homes?
- What is the outlook for property prices in France over the coming months… and in the longer term?
- If I were to buy in today’s market, can I expect my property to retain its value over the long term? Can I expect it to gain in value over coming years?
- Is this a good time to sell property? What would your advice be on maximising a sale?
Are property prices actually falling?
“New property prices have fallen slightly since the start of the year, but it would be wrong to see this as a major trend. It has more to do with developer marketing than any real decline in the market. Demand for homes outstrips supply in the French market, so there is no reason for prices to fall by any significant amount”.
Is the situation the same in all regions of France?
“The situation varies greatly from region to region. In the Paris Region, the supply of homes falls well short of demand, which has the effect of raising prices, whilst in the north of the country, supply and demand are more or less in balance. The south, west and Rhône-Alpes regions are all experiencing a significant influx of people, and strong demand is keeping prices high”.
Is the rise in oil prices having any effect on property prices?
“The rise in the price of oil has a direct effect on the cost of certain oil-based materials, such as PVC. But it also pumps up transport costs, which are automatically reflected in the cost per m2 of new property.
We can also expect some indirect effects, since rising fuel prices effectively reduce household spending power. Buyers are now having to think about the distance between home and work when they calculate how much they can borrow – which why homes outside urban areas are attracting less interest”.
Is the current situation in the French property market at all comparable to what is happening in the UK, US and Spanish markets, where prices are falling?
“No, our situation is not comparable to theirs. The main difference between France and these other national markets is the way in which banks lend on property. In France, bank loans are based on the borrower’s income, whilst in Spain, the UK and the US, loans are based on the valuation of the property itself, so if prices fall, the situation can quickly become critical. Another important factor is that 85% of property lending in France is advanced at a fixed rate of interest, which offers greater security than variable rates”.
Isn’t it the case that lower prices for new property mean lower quality homes?
“No, lower prices for new property have no direct link to the quality of construction and finish”.
What is the outlook for property prices in France over the coming months… and in the longer term?
“We do not expect property prices to change very much. Between now and the turn of the year 2009/2010, we could well see prices stagnating. The construction shortfall in France is approaching 500,000 homes, so any significant reduction in property prices is not a realistic possibility. There simply aren’t enough homes to go around! To be frank, I’m more afraid of a housing shortage than a tumble in prices”.
If I were to buy in today’s market, can I expect my property to retain its value over the long term? Can I expect it to gain in value over coming years?
“This kind of forecasting is very difficult. That said, we have never seen property values fall over the long term! It’s even less likely to happen when the property concerned is well located and built to a high standard. For proof of that, we need look no further than the housing crisis of the 1990s, after which prices recovered within just a few years. Given that France has low inflation and an increasing number of households, I believe we can look forward to a property market that will remain dynamic”.
Is this a good time to sell property? What would your advice be on maximising a sale?
“It’s analysing your needs that will dictate whether you need to sell your home: maybe you need more space, or perhaps you’re changing jobs, getting divorced or planning a family?
But be aware that the market has changed a lot in the last 6 months. Before putting your property on the market, I’d advise you to do some serious research and make sure that your asking price is realistic within your local market”.
