French building sector feeling effects of war in Ukraine
The war in Ukraine is having a knock-on effect on several sectors in France, including the building trade.
One main issue is steel. Italian producers are the number one suppliers to French construction companies, and they get their raw materials from Russia and Ukraine.
Orders on Italian-made steel were stopped when Russia invaded Ukraine two weeks ago. They have now restarted but without a time frame on delivery and without set prices.
The second largest steel producer for French construction companies is Turkey, which also gets its supplies from Ukraine.
Another issue for the sector is energy costs, which are increasing rapidly in Europe.
It means that the production of materials such as aluminium, tiles, bricks, etc. is increasing as these are made under high temperatures.
France’s building federations are in talks with the government about managing the increasing costs.
Anyone planning property construction or even renovation jobs could face higher prices and delays in getting materials.
Couple waiting on €16,000 in renovation grants write to minister
A couple from the north-western department of Orne has written to France’s housing minister and local authorities about the fact they are due €15,800 in renovation grants dating back to May 2021.
They carried out work to insulate several rooms of their house last year, with costs rising to around €32,000.
To help cover some of it, they applied for a grant through the MaPrimeRénov’ scheme, aimed at helping homeowners make their properties more energy efficient.
Read more about this scheme and how to apply for it in our article here: How to apply for a renovation grant for your French home.
Their grant request was approved in May 2021, but they are still waiting for €10,800 to be reimbursed to them.
“In early January 2022, they informed us that our bank details had not been sent in the correct format, which was blocking the process. Ten minutes after we hung up, we re-sent the document in the correct format. Since then, nothing,” the couple told Ouest-France.
The couple is also expecting €5,000 in subsidies from another scheme called Certificats d’économies d’énergie (CEE). This obliges energy suppliers to finance work that reduces gas, electricity or fuel oil consumption.
The couple went with energy company Engie, but said it has not paid up and is making difficult demands, such as asking that the tradesman who carried out the renovation add to the hand-written invoice all the different types of screws used.
The couple say they have written to France’s housing minister Emmanuelle Wargon and local authorities about their situation.
Court ruling states email withdrawal of ‘promise of sale’ is allowed
A court ruling has stated that it is acceptable to withdraw a promise of sale agreement by sending an email, even last-minute, to your notaire.
A promesse de vente is an agreement made between the seller and the buyer of a property. It means that the seller has to sell the property to the buyer for the amount agreed, while giving the buyer a period of time to think about their decision.
Typically, if a buyer wants to pull out of buying a property in this period, they send a letter with recorded delivery and acknowledgement of receipt informing their notaire.
But a new court ruling by the Cour de cassation, the highest court in the French judicial system, means that you can also cancel this promise by an email to your notaire, even at the very last minute.
The February 2 ruling came after a case involving the sale of a property that fell through in 2017. A couple had agreed a promise of sale with a vendor with a reflection period of 10 days, for a property worth €1.22million.
On the 10th day after the promise of sale was confirmed, at 18:25, they sent an email to their notaire backing out of the sale.
The seller disagreed with this and claimed it was not a valid withdrawal, and the case went to a court of appeal that initially ruled in favour of the seller.
However, the Cour de cassation overturned this decision, stating that the email withdrawal was sufficient as it was received and confirmed by a notaire, an official whose testimony is not in doubt, within the required timeframe.
‘Notaire fees’ in 2021 €3billion more than in 2020
Revenue generated from notaires’ fees rose by €3billion in 2021 compared to 2020 on the back of a surge in property sales.
2021 was a record year in terms of sales and price increases, coming after a stunted 2020, when sales fell due to the coronavirus pandemic. That created pent up demand, and also saw many projects pushed back, adding to the high number of sales in 2021.
And more sales mean more notaire fees.
To clarify, notaires who help manage the purchase or sale of a property only receive a part of what are commonly called notaire fees (frais de notaire). The majority is paid as a tax - droits de mutation à titre onéreux (DMTO) - to local authorities, principally the local department.
For non-new-build properties, the DMTO is equal to around 8% of the cost of the sale of the property. Of this 8%, over 80% goes towards local taxes.
Last year, local departments took €16.2billion in their share of notaire fees, an increase of €3.2 billion in one year (after €13billion in 2020) and an average annual increase of 11% over the period from 2013 to 2021.
While the property market is expected to remain dynamic in 2022, it should also return to being closer to pre-pandemic levels. This should mean that the notaire fees should level out again.
Mortgage interest rates have risen since start of year
Interest rates on mortgages have gradually increased since the beginning of this year. They are averaging around 1.2% on a 20-year loan, according to Meilleurtaux, a real estate mortgage brokerage site that publishes regular reports on mortgage rates.
A recent report notes that there is a scarcity of rates below 1%, which was common in 2021.
Today’s average rate is still below 2020 (1.35%) and 2019 levels (1.4%).
These increasing rates could impact certain people with lower incomes looking to get on the property ladder, due to a new law limiting indebtedness that came into effect at the start of the year.
It states that a borrower's monthly debt ratio can no longer exceed 35% – this means their expenditure, including the monthly mortgage repayment, cannot be more than 35% of their income. This is in line with recommendations made by the Haut Conseil de stabilité financière (HCSF).
Meilleurtaux states that with rising interest rates on mortgages, more potential buyers could fail to secure loans, stating that three in 10 mortgage applicants exceed the 35% debt rule.
However, there are exceptions for banks to grant mortgages to certain lower-income borrowers, which could limit the impact of this new law on borrowers.