News: French house prices set to fall in 2007

A joint survey by the BIPE forecasting institute and Empruntis has predicted that house prices are set to drop in France next year for the first time in a decade, reports Ross Tieman in The Business...

House price inflation in France is slowing sharply after a decade of strong growth.  BIPE-Empruntis report that after year-on-year growth of around 14% at the end of June, 2006 is set to close with growth averaging only 6% for the year as a whole.

The warning signs of an imminent slowdown are showing as typical French buyers are purchasing smaller average surface areas and devoting larger proportions of their income to mortgage repayments over increasing repayment periods.  Now a joint survey by the BIPE forecasting institute and French mortgage broker Empruntis is predicting that average house prices in France will actually drop by 4% in 2007.

This gloomy scenario would see France plummet to the bottom of international house price league tables - a stark turnaround in fortunes after the country enjoyed the fourth fastest house price growth worldwide in the first half of 2006 after Denmark, Belgium and Ireland.

Other key findings of the report:

  • The survey indicates that with rising interest rates and mortgage lenders demanding bigger deposits, the average age of a first-time buyer in France has risen to 35 years.
  • Approximately 56% of new homes built in France in 2006 were acquired for buy-to-let through schemes under which purchasers enjoy tax relief.
  • It is now cheaper to rent an apartment in France than to buy one and the price difference is growing.
  • In the first quarter of 2006, a typical French buyer was making monthly mortgage repayments of EURO 1,140 for an apartment capable of generating EURO 1,000 a month in rent; by the second quarter, those repayments had risen to EURO 1,210.

The findings of BIPE and Empruntis are based on an analysis of 50,000 home loan applications processed by Empruntis.

SOURCE: www.thebusinessonline.com

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