Notaires reports that French residential real estate prices dipped in the second quarter of 2013 and Standard & Poor’s predicts the downward trend will continue into next year due to rising interest rates and hikes in property taxes. The 1.1% overall slip in prices for existing homes and apartments was not due one or two poorly performing areas, but rather a balanced mix of performance across regions and property types. There were no significant outliers in gains or losses, but predictions for next year put losses in the neighborhood of 4% overall. For more on this continue reading the following article from Property Wire.
House prices in France fell by 1.1% on an annual basis in the second quarter of 2013 but there is a wide variation on a regional basis, according to latest figures reported by Notaires.
And an analysis from ratings agency Standard & Poor’s says that prices in France will continue falling next year due to an expected increase in interest rates and hikes in property tax and Notaires fees.
The figures from the Notaires shows that the Pas de Calais saw the biggest fall in the figures for apartments, which do not include new builds, with a fall of 10.l7% followed by the Indre and Loire, down 8.9% and the Loire down 7.4%.
Meurthe and Moselle saw the biggest climb in apartment prices, up 10.6%, while prices in Les Landes were up 8.9% and in Herault up 5.1%. Herault also saw the biggest rise in house prices, up 11.7%, followed by Meurthe and Moselle with house price growth of 7%. The biggest fall in house prices was in Gard and Calvados, down 6.7% and 5.7% respectively.
In cities Montpellier, Strasbourg and Lyon saw prices increases of 5% while prices were down 8.8% in St Etienne, down 6.4% in Grenoble, and 6% in Nice.
In the 12 months to the end of June sales of existing homes were down 13% year on year but they have been climbing every month in 2013. But again there are regional variations with the Ile de France and Paris suburbs seeing sales increase by 10% and 5% respectively.
The Notaires report also shows that fewer new homes are being built. Planning permits fell by 13.5% year on year to the end of August and new starts were down 11.1%. But the decline has been accelerating.
Meanwhile, the property market in France is unlikely to improve in the coming year. European housing markets are set to stabilise in 2014 except in France, according to an analysis report from Standard & Poor’s. It says that an expected rise in market interest rates is going to keep the French housing market subdued.
The report predicts that the fall in housing prices will accelerate next year to 4% from an estimate of 3% this year. Low interest rates have compensated for the declining solvency of French home buyers in recent years, said S&P, and buyers will also feel the hit of higher taxes on property sales next year.
It also noted that French housing prices have held up relatively well since global economic crisis began in 2008, with sales volumes declining more than price.
‘The modest correction so far means that homes remain expensive in terms of affordability,’ S&P said, citing an estimate by a French mortgage insurance group that the market is still overvalued by about 15%.
To add to the woes of buyers and sellers, Notaires fees are likely to increase in January. The fees will be decided regionally, giving different communes the power to raise them from the current 3.8% cap up to a possible 4.5%.
A new national tax of 1.2% will also come into play. Currently the cost of buying a property is around 7% and overall this is expected to rise to 7.7%. That puts an extra €2,100 on the cost of a €300,000 property.
This article was republished with permission from Property Wire.