Although the French property market has suffered less from the
economic downturn than that in other European countries, there has
been a noticeable drop in property transactions over the past two
years. The French economy generally remains unstable and the French
are concerned about their spending power. As a result property
projects, be it sale, purchase or development, are temporarily
being put on hold. Businesses too are watching cash flow
attentively, and certain industry sectors (e.g. automobile) have
been making large-scale redundancies whilst others scale back
investment plans, resulting in reduced activity within the
commercial property sector.
The volume of residential property transactions fell by 20%
during the last half of 2008 and the first quarter of 2009, with
sellers choosing to wait for better conditions rather than face a
drop in asset values.
Property prices have not fallen significantly in France, unlike
other countries particularly Spain, the UK and the USA. This is
attributable to the slower rise in property prices over the last
decade and the fact that they did not reach the same excessive
levels or frenzied purchase behaviour as experienced by other
This price stability, despite the small decline during the
second quarter of 2008, is partly due to continued fairly low
interest rates (fixed rates at 4 to 5% on average) and flexible
During the first quarter of 2009, residential property prices
decreased (- 0.4% for flats and -1.7% for houses) but not at the
rate of -6.5% that was experienced during the third and fourth
quarters of 2008. A national trend has also emerged; house prices
in the suburbs, outskirts of the big cities or properties in the
country are dropping, whereas one or two bedroom flats in town
centres remain stable.
The commercial real estate market has contracted recently in
line with the general economic slowdown. Rental values have
decreased, however they remain relatively high, particularly in the
Paris area (Ile de France).
French authorities are offering a number of incentives in an
effort to boost the property market. The first of these incentives
was introduced in December 2008 through increasing the thresholds
for eligibility for the interest free mortgage (prêt à
taux zéro). More recently, in March 2009 the
"Molle" Law was passed, aimed at improving housing
conditions. The Molle Law contains several provisions intended to
protect the underprivileged as well as tenants (such as obligations
to state in residential property leases the floor area of the
rented property, limiting the rights of landlords to obtain a
guarantee for the lease, improving property co-ownership etc.).
These measures follow on from the LME Law (Loi de Modernisation
de l'Economie) of 4 August 2008 intended to boost the French
economy. The LME Law included several provisions relating to
commercial property such as the possibility for non-trading
professions (e.g. lawyers) to enter into a commercial lease or the
extension of the period granted to the tenant to leave the premises
if the lease is not renewed by the landlord.
Current economic conditions have led to a significant drop in
property purchases by foreigners. Like French purchasers,
foreigners looking for second homes or a place to retire to have
felt the effect of the financial crisis.
The drop in the value of the pound and the US dollar against the
Euro means French properties are now more expensive and people
living in France with UK incomes (e.g. state pensions) are finding
that the cost of living has increased compared to a year ago.
The decline in property purchases by foreigners is particularly
noticeable especially in rural cottages or country houses. Areas
like the Dordogne or the Quercy are still popular amongst British
purchasers, but many are now reviewing their budgets or putting
their French property plans on hold. However, in places like Paris
and the Côte d'Azur, although property prices have
dropped slightly, there is still a strong demand from foreigners
for upmarket properties with prestigious addresses.
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guide to the subject matter. Specialist advice should be sought
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