French Property Market Bearing Up
Friday, September 30, 2011

New research suggests that, despite the gloomy economic outlook, the French property market remains strong, particularly in areas favoured by foreign buyers.

According to independent UK regulated mortgage brokers Offshoreonline.org, research produced by the state-regulated Notaires de France (conveyancing lawyers) and mortgage bank BNP Paribas says that in the 12 months to the end of June this year prices rose in all of the key areas favoured by UK buyers, namely Paris, the Cote D’Azur and Bordeaux regions.

The study revealed that prices rose the strongest in Paris, which recorded a 23% increase in prices and a 2% increase in the volume of sales, whilst prices in the Bordeaux area rose by a more modest 3.5%. Activity in Provence and the Cote D’Azur was also encouraging, with a 6% rise in property prices over the 12 months period in question.

The data produced by BNP Parisbas also claims to show that sales rose by 20% across the whole of France during the period, while prices have grown on average by up to 8%.

“These statistics will come as a shock to many UK buyers who probably expected the French market to be contracting in the same way that prices generally are in the UK, with the exception of London," said Offshoreonline.org managing Director Tim Harvey. "However, it is important to note that French banks are traditionally more cautious in their lending than their UK counterparts and so France has simply not suffered the same violent shifts in property values that affected the UK, market moves which we now know were unsustainable.”

House price growth was more subdued in other regions of France however, such as Franche-Comte in the East (1.8%), upper Normandy (below 4%) and Lorraine (below 3%).

Britons remain the third-largest overseas buyers of property in France, although UK buyers accounted for 11% of all property purchased in France last year, down from 14% in 2008.

While Britons tend to get less for the pound than they did a few years ago, the sterling/euro exchange rate has been stable for the past three years, and Harvey believes that this may tempt many buyers back to France.

“Commentators refer to the value of sterling which has been volatile and of course affects the real price a UK buyer will pay. However, over the past three years, the sterling/euro exchange rate has not moved by a huge amount in absolute terms, so today’s exchange rates are broadly comparable to the position in late 2008 or early 2009. With property prices showing strength and rising again, we believe many buyers who have ben waiting on the side-lines will now come back into the market.”

According to recently released research by UK-based global property consultants Knight Frank, the global house price market is currently at its weakest since 2009, with price inflation averaging 1.7% in the 12 months to June 30, 2011, although strong gains were still recorded in many parts of Asia.

Data released by the firm earlier this month suggested that UK house prices have fallen for 15 consecutive months, albeit at the slowest pace since July last year. London, however, is the only region where the market remains buoyant.