France has suffered like most Western countries in the midst of the recent financial and fiscal crises. A combination of rising taxes, stagnant wages and low growth has caused the property market to struggle somewhat since the banking crash of 2007. However, unlike many other developing nations - including Britain - the country's real estate sector is bucking the trend of stagnant house prices in Europe. France has always enjoyed one of the most inflationary housing markets in the world, and people considering a property investment in the country have reason to be optimistic.
The Current State of the French Real Estate Market
The FNAIM is a professional body in France that represents estate agents, and they are forecasting a short-term drop in average property prices of between 1% and 5% this year. However, property-owners in the major cities of France can expect price increases of between 3 and 8%. This urban-led recovery bodes well for the future of France's depressed property market, and it could mean a return to sustained price-growth is not too far away. The French government's decision to charge a higher rate of tax on the rental incomes of people living outside France does not seem to have a significant effect on the numbers of British buyers showing an interest in the French property market. However, history suggests that the long-term trend of property prices in France is upwards.
An Opportunity for Investors
Whilst the signs for the future are good, France has experienced the same kind of stagnancy in its average property prices that has afflicted most of the developed world. Although this has been extremely painful since the banking crash of 2007, it presents a huge opportunity for British investors looking for a bargain. Whilst prices are depressed - and falling slightly in some areas - the overall outlook for the coming decades is positive - according to the history books.
The National Institute for Statistical and Economic Studies recently announced that urban house prices fell by 1.63% in 2012 - a figure adjusted to over 3% when inflation was taken into account. The wealthiest and most populous region of France is Ile-de-France, and La Chambre des Notaires de Paris recently reported that the average price of apartments in that region fell by 0.5% in 2012, and that figure was nearer 1% in Paris itself. Whilst many people will consider figures such as these to paint a bleak picture, long-term investors in France's property market can still look forward to rising property prices. The truth is, this latest downturn is temporary, as history suggests France's real estate sector is one of the healthiest in the world.
History Suggests a Far Rosier Outlook for the French Property Market
It is widely agreed that the period between 1997 and 2007 saw the biggest housing boom in French history. Although prices rose by 50% in the mid 1980's, the recession of the late 1980s corrected those gains somewhat. However, French property prices rose by an astonishing 150% between 1997 and 2007 - an unprecedented rate of growth. For people who purchased French property in the early 1990s, the return on investment in only 20 years was simply staggering, and there is no reason to think that this long-term trend will not continue. Indeed, there are some economists who believe that the current problems facing the real estate market in France are just temporary blips.
The banking crash of 2007 had a direct and instantaneous impact on the housing markets of the Western world, and France was one of the worst-hit. Price-falls in 2008 and 2009 were tough on the economy, but many other countries - including the UK - were experiencing similar problems. However, France has been something of a success story since then. Indeed, house prices rose by an incredible 7.57% in 2010 and 3.66% in 2011 - an impressive performance in the midst of austerity measures, the capital restructuring of banks and the Eurozone debt crisis.
France's Stable Mortgage Market
France has one of the world's largest mortgage markets. Between 2004 and 2007, housing loans rose by an average of 14% year on year - a far higher number than in most other developed countries of the world. Since 2000, the mortgage market in France nearly doubled in size, from 22% of GDP (Gross Domestic Product) to 43.7% in 2011. Fixed-rate mortgages are prevalent in France, and the relative stability they deliver allowed the country's mortgage market to continue to grow - despite the crash of 2007.
Property prices in France have increased steadily over the 20th century, and while there have been some notable blips during that time, those investors who are prepared to plan for the long-term should expect more of the same. Despite the drying up of credit, sovereign debt and austerity measures, the French property market has proved that it is robust and sufficiently stable to withstand temporary periods of decline. The French property market is one of the most well-regulated in the world, so British investors should not be too concerned about the country's long-term future.