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New sales record as buyers’ confidence is restored

Positive outlook as low mortgage rates drive sales 

On these pages the term ‘older’ homes refers to properties built more than five years ago. Most figures relate to the second quarter of 2017, the latest period for which final notaire sales figures are available. As notaires deal with all French property sales their market analysis is the most comprehensive available


The number of property sales in France continues to grow. The latest Notaires de France quarterly market review reveals that by the end of June this year the 12-month running total hit a new record of 921,000 – considerably up on the year before which saw 819,000 sales.

These volumes are exceptional and compare to the year to February 2015 which saw just 691,000 transactions, the year to February 2013 652,000 and at the peak of the financial crisis the 12 months to August 2009 just 564,000.

Nevertheless, because the housing stock has grown by 1% over the year the increase in sales is still slightly down in percentage terms of the total stock compared to the years 1999-2007. The gap, however, is closing as the ratio in 1999-2007 was 2.7% and is now 2.6%.

The growth is partly due to regional prices tumbling after the 2008 financial crisis and continuing low mortgage lending rates.

In the second quarter of 2017 property prices continued to rise – up 0.8% on the previous three months. The rise was greater for flats (+1.3%) than for houses (+0.5%). The growth is continuing and the second quarter of 2017 shows a 3.2% rise compared to the second quarter of 2016. This follows a 2.5% rise for the first quarter compared to the year before and marks the third quarter in a row where the 12-month rise was higher for flats (3.9%) than for houses (2.7%).

In Ile-de-France, prices for older properties continue to go up. Prices in the 2017 second quarter were up 1.3% on the first quarter which had shown a similar rise. Over 12 months, the rise is even stronger at 3.9% against the same period to July 2016, after 3.4% at the start of this year and 2.6% at the end of 2016.

This acceleration is driven by a rise in flat prices (up 4.9% over a year) and especially in Paris where prices rose 6.6% year on year. The rise in prices for houses is less marked and more regular, up 1.9% (after 2% the quarter before).

Across France prices for older properties rose less strongly than in the capital and suburbs: up 0.6% between the first and second quarters, half  the previous quarter’s rise of 1.2%.

Over 12 months, the growth is notably less strong in the regions than in Ile-de-France but it is nonetheless accelerating – up 2.9% between the second quarter of 2016 and the second quarter of 2017 after 2% the preceding quarter. The rise is similar for flats at 3%.

The majority of departments saw the mean price (middle price out of all sale prices) grow in the second quarter but with some exceptions: in Alpes-de-Haute-Provence flat prices fell 10% and house prices 5%; in Loir-et-Cher flats were down 3% and houses 4%; in Manche, flat prices were down 14% and houses 3% while flats in Yonne were down 10% and houses 5%.

As in the previous quarter, some towns saw prices for flats falling: Dijon is down 3.5% over the year, Saint-Etienne -0.7% and Le Havre and Orléans -0.1%.

In Bordeaux flat prices are still rising – up 12.1% year on year. Le Mans is also up (8.7%) as are Rennes (8.6%), Brest (8.5%), Rouen (8%) and Nantes (7.8%).

For the most part, prices were also up for houses in large urban areas. Bordeaux rose 9.8%, Le Mans 9.6% followed by Nancy and Orléans on 8%.

However, Rouen, Dunkirk, Saint-Nazaire and Lille saw drops of 2-3%.

Fortunately, with a few exceptions particularly in Paris which is a market apart, there is no spike in prices. As a result, with prices mostly picking up again and mortgage rates trending slightly upwards, it is reasonable to assume that sale volumes are nearing a peak.

This is seen as positive as a stabilisation of volumes and mortgage rates helps to moderate prices and avoid the risk of a property bubble.

Avoiding a situation where the financial burden on households reaches unacceptable levels is important to prevent a housing crisis and no one wants to close off the market to those on more modest incomes.

However, higher social charges will also increase capital gains tax when due on sales and will also have a significant impact on the taxation of rental income.

Meanwhile, despite the fact that the retargeting of wealth tax ISF to property (see here) cannot be seen as a surtax as taxation remains the same the fact that it is being replaced by the Impôt sur la Fortune Immobilière (IFI) suggests that a property owner is wealthy while a large stocks and shares portfolio or luxury objects are no longer seen as ‘capital’.

In the notaires’ view this ignores the value for both sides of investing in property: for the owner who sees income rise and a boost to their retirement fund and  for the tenant who is happy to find an alternative to social housing if their  earning level is above the threshold for access to this. In addition, the building industry – a significant contributor to GDP and employment – needs building and renovation activity.
Current favourable plans include:

  • Boosting urban real estate through special tax rebates on building land sales in housing shortage areas or reduced tax on sales of business premises for conversion into housing;
  • Extending the Pinel rental investment scheme for four years in shortage areas; continuing 0% loans in the same areas;
  • Ability to undertake land and town planning, buildings, rental management and property transactions online;
  • Encouraging social housing mobility;
  • Building 60,000 student housing units in five years – and 20,000 homes for young workers in the same period;
  • Encouraging intergenerational housing by exempting any rent received from a student living in your home from income tax.

As long as mortgage rates and property prices remain at their current levels it is thought that the market will remain optimistic as people believe they should buy before either, or both, rise. 

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