Exceptional year sees strong growth in French property market

Exceptional year sees strong growth in French property market
16/02/2018 , by , in INTERNATIONAL

The residential property market in France got back on track in 2017 with sales reaching a record high of 958,000 in the 12 months to October, some 15.6% above the previous year’s level.

The latest analysis report from S&P also shows that first time buyers returned to the market and prices have also been rising strongly, up 3.9% in the first three quarters of the year, led by growth of 5.8% in Paris.

But the proportion of buy to let investors continued to decline to 21% of the sales from 30% in 2012. The report suggests that this reflects in part the growing importance of short rentals. Indeed, Paris is now the largest market for Airbnb.

For 2017 as a whole, the French solicitors association predicts that a million sales will be reached. This level of activity reflects essentially three factors: persistently low interest rates, a recovering economy, and a bounce in potential buyers’ confidence after the election of Emmanuel Macron as President in June, the report says.

However, it also points out that 2017 was in many ways an exception and the housing market is now likely to regulate itself in 2018 back closer to long term averages.
‘Last year was special in the sense that the relief following the presidential elections, strong economic growth, and very favourable credit conditions provided a onetime boost to the market that is very unlikely to happen again,’ the report explains.

It also points out that the rise in house prices was the strongest since 2012 and there are early signs that the trend is now levelling off. Meanwhile, the growth in housing loans also seems to have slowed in the final months of last year.

Along with this first time buyers are reporting increased difficulty in entering the market given the deteriorated affordability.

‘We anticipate the market will experience a soft landing in the coming year and a half. Prices should continue to increase, but much less than last year, and it should be primarily concentrated in the largest cities, such as Paris,’ the report says.

‘Similarly the trend in transactions should level off as deteriorated market affordability hits demand. We are not predicting a market crash, far from it, but a return to less exceptional conditions is now in train,’ it adds.

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