France prices falling? (low activity in market)

[Davep]

Hi Gerry,
With a name like O'Neill I thought you would be more in tune with the "Irish mentality" . The "old enemy" attitude is very much alive and well in Ireland and I think reflects itself in the way Irish people purchase in France. As to Irish using the " popular UK based online property portals", in my experience of flying over to France from Dublin and talking to the, what appears to be, hoards of Irish property owners and prospective, it is more possible to be by word of mouth and personal recommendation.
I have been on holiday in France for over 20 years. Being a teacher married to a teacher, We have had up to 7-8 weeks every year to explore France. I do not think that there is a town south of Le Harve that we have not visited at some time. We picked our region having spent the last five years in the Dordogne. We wanted somewhere that was a bit cooler in the summer and the possibility of skiing in winter. So we ended up near Limoux.
Lots of people ask me to recommend somewhere in France and it is fairly easy if you know where in Ireland they come from. Donegal to Cork along the coast will be looking at coastal Atlantic areas. Midlands will look to the Centre, Limousin, Dordogne and the Lot. Young couples with kids who want holiday homes will tend to Bretagne, Vendée to the Landes. Older couples who want a place to retire in summer will look to the Languedoc. I am amazed at the number of Irish I have talked to that have used the hinterland of the "Ryanair" bases as a choice for their property. At the moment there is great interest in the Rugby playing regions south of Toulouse. Lots of Irish clubs are arranging visits to the south for games. Lots of potential clients, if approached properly!
You are correct in saying that there is a slow down in the Irish market in housing but I feel that this is reflected in the poor value that is to be found in Ireland when compared to France. There is still a lot of cash floating about, just not into Irish property. My own town, about 100km north of Dublin has 3 bed detached for €370+. You can get a small 3 bed mid terrace house for €250. When you compare this with France, there is no contest. Irish investors still have the cash to invest but home is not good at the moment. The prices are adjusting down up to 10% but still it is not enough to attract investors.
I last flew to France about 4 weeks ago and was talking to 4 couples from Munster heading out to check out the property. They were there looking due to the dreadful summer last year in Ireland. They wanted something more dependable, weather wise. They also wanted to see something and not an "off plan" type. I think that thios is the way to go as lots of Irish investors have been and will be badly burned in trying to offload Bulgarian and Turkish property. I personally know two local builders who, when the building boom was at its height here , headed off the Bulgaria and lots of locals have bought there as an investment. Trouble is with all the buildings coming on stream mid 2008 to mid 2009, there will be an almighty glut of properties. Getting to Bulgaria and Turkey is a major problem from Ireland. Flights are mainly charter and I know of one person who had to book a "holiday" with accommodation to get to his own place. I mention this as it is key that prospective buyers can get to their property on low cost airlines. Thus "Ryanair" destinations are going to be sought after.
We also have the additional problem that getting off the island is VERY VERY expensive. This year we will be sailing from Rosslare to Cherbourge and we got a reasonable price for two and car.....€980!!! Most southern Irish will not travel through England as the time taken to do so will knock up to four days off a typical two week holiday.
Sorry for the long winded reply but it might help.
Dave

 

[neustria]

These last exchanges have been interesting and quite represent for me what a property forum should be all about.
However there is a concept here which has been floating about which everybody here seems to grasp well - except me!
Would any of you be so kind as to take a minute or two to explain what "leaseback" is exactly and, if possible, suggest what the equivalent in the French language might be...?

Cheers, Neustria

 

[Davep]

Hi,
I took this piece from the website of frenchtree.com. I think it is a fair explanation of leaseback. I am sorry I do not know the french term for them. There are very simple reasons I do not consider them suitable for myself. Mainly , I wanted a home there. I also wanted to go to my house when I wanted and not pre booked a year in advance. I am not very sure of the guaranteed rental return. I feel that it might not be possible to pay out due to lower occupancy that quoted. The fact that it is for 9 years, for me a long time. I also would like to get first hand information on the resale problems within that period. And finally I think that the property will always be classified as "Maison du vacances" and not suitable for long term residence or retirement.
Dave

Leaseback – what’s in it for the buyer? from FrenchEntrée.com

 

[neustria]

To Gerry O'NEILL and Dave re leaseback/credit-bail
**************************************************************
Thank you both. The referenced article was very complete and answered my question fully. I had heard of such systems but out of hand had dismissed them as entailing too many drawbacks.

Also I was quite amused by the phrase:

"On average a yield ranging from 2.5 per cent to 5 per cent,
guaranteed income normally paid once a year ... "

2.5% being one thing and 5% quite another!!! In my meager experience I would surmise that the companies which guarantee the higher figure are also those which stand up less well under scutiny.

As you said, nine years is a long time! Look no further!

Neustria

 

[neustria]

Sterling at a Three Week High Against the Euro

"Although sterling climbed to a three week high against the euro today...analysts don't foresee it going beyond 1.3 to the pound this year."
(Premier French Property) posted on May 30, 2008
**************************************************************

What is three weeks when you are investing for the long term in Real Estate?

In fact, year on year as of today, the pound has lost -17.24% of its value against the euro:
On July 2, 2007, one euro cost 67.46 pence. Today the same euro will cost you 79.09 pence.

These are interbank rates. The UK based investor would also have had to pay commission on the exchange for a real estate purchase, although the proportion of the relative pound depreciation over one year would still be roughly the same as the figure given above (-17% +).

With the benefit of hindsight, assuming that a purchase had been paid for in France 12 months ago, the gain by the euro's appreciation should have more than offset the loss caused the the drop in the prices of property, with a hypothetical gain of maybe about 10% over the year, depending on where the property was located. In an area like the Poitou-Charentes, the problem would now be to find the rare buyer for your holdings at even today's lower prices. He who had invested in the more solid markets of the Cote d'Azur or Paris would be better off.

This analysis underlies the importance of currency fluctuations when making your decision. A continental investor now looking to buy into the dropping British market would have the double advantage of cheaper prices and a strong currency.

The current situation certainly does not favour the UK based investor in France, given the continued weakness of sterling, especially since real property prices are falling and the fall seems to be accelerating.

One thing that I do believe is that the current rate of inflation could, in the long term, be favorable for the patient investor, because real estate prices do traditionally tend to keep pace with local currency depreciation - even if, at the present time, there appears to be no sign of this quite yet.

Finally, if you want some bad advice, just go ask an "expert"!

One month after the post above, the pound had already slid below the 1,30 euro per pound level which the analysts anticipated at year end. It currently stands at 1.265, whereas a year ago, it took 1.485 euros to buy a pound.

FXHistory - Historical Currency Exchange Rates

 

[Monika Berlin]

Hi guys.
After the falls in property prices in US I was told by a friend that has few apartments in France (Nice) That the market was so slow and that prices
were coming down!
Is this true? and do you expect this to go further?

Hi birdy,

As you probably already know your worst fears might have come true in the meantime. Since the global property bubble burst, France has gotten its own fair share of market loss.

I think we will see further losses over the next few months for sure. having looked at various markets throughout Europe in the past few months I see a common show of chain reaction.

Are there any of you who see this in a similar way? I'd love to get some feedback.

Thanks
Monika

 

[neustria]

Hello Monika,

I have been posting here for weeks saying that the overall economic situation in the US and Europe will necessarily take its toll on the property markets here, and that this is definitely NOT the time to invest. I think that in real estate, as with the equity markets, we will need to see some kind of "capitulation" before things begin to level out again. At this point I think that if anything, the drops are accelerating. Only Germany so far seems to be holding out in the current conditions.

The equity mrkets are a good leading indicator of economic turnarounds. They actually tend to bounce back before the economic statistics show any sign of improvement. I think that when this happens, and the upswing in the markets is durable, then that might be the time to jump in again.

As things stand now, news out of the UK, the US, and Spain suggest that this real estate downturn is going to be the most severe one in decades.

I think that the inflation factor could actually prove to be a positive for owners of real estate. House prices always keep up with inflation in the long term. So we might see a 10%-15% jump in real estate just to get back to where we were in purchasing power terms before the downturn.

 

[tony ben]

Has the party ended in France too, it seems to be going worldwide know.

 

[gfplux]

In our area of the Poitou-Charentes (south Deux-Sevres) there are hundreds of properties on the market with no buyer in sight. There are certainly amongst these some good properties to be found at well under peak 2006 valuations. If you want to buy, you can take your time, in this area at least I can't see anything picking up anytime soon.

Beware of the agents who systematically paint a rosy view of the situation in order to entice you to buy. Never forget where the vested interest of the person giving you his advice lies!

As regards France it shouldn't be forgotten - it often it is here - that Real Estate had a fantastic run up from 2000-2005. Such periods, when they come, are usually very spaced out over time. I believe that the inflation provoked by the country's adhesion to the Euro played a major part in this rise, which also happened to coincide with the bursting of the DotCom bubble. To my knowledge only Germany remained unaffected, but that country had its own specific set of issues.

France has traditionally a segmented market with places like Paris and the Riviera behaving one way, remoter areas quite another. You will have to look at the specific conditions in the market you are looking at. In desirable urban high-density areas prices seem to hold up better in soft market conditions as we are seeing now.

I hope that this is useful to some of you.

Hello Neustria,
It is interesting to see your comments about your long term property hold in France. This is my experience.
I bought near Ste Maxime (83) in 1991. The value then halved during the rest of the 90's and probably reached bottom in 98. I believe the value then reached an all time high in 2006/7 of about 3 times the original purchase price. Today 2008 I believe prices are off the peak by about 10 to 20 % but as there are fewer buyers about location is everything. Property thrown up in the last few years inland from the coast in my opinion is a very hard sell at the moment.
My property is 200 meters from the sea but it is not for sale.
Good luck in Germany
Graham
Luxembourg

 

[neustria]

Greetings "Neighbour"!

Thank you for your interesting post. I am quite surprised to learn that prices in the Var actually fell by 50% in some areas between 1991-1998. I had holdings in Aix at that time but there, I think, prices must have held up better.

I sold an appartment in Aix in January of this year because I felt that, at best, prices were going to stagnate. I sold easily, as it turned out, but I was lucky and also the price was right. My contact there tells me that prices are now slipping.

We bought a house in the South Deux-Sevres in late 1993 and, in the following years, prices crept up. English-speaking people began moving into the area in numbers and this supported a market which otherwise was somewhat somnolent. As real estate prices in the UK outperformed almost any other European market, people began selling out there to have a taste of the "good life" down south.

Then came the boom years 2001-2006. The British arrived in droves and prices here, as everywhere, tacked on about 30% annually, if not more. By 2006 our holdings had tripled in value... The locals, of course, attributed the housig boom to 'les anglais'!

Today, the late comers to the party are finding themselves either with negative equity, or with a paper profit but with nobody to sell to. So many came and then, seemingly all together, decided that life there was getting expensive (euro appreciation against sterling) and their retirement no longer covered their needs.

We had already noticed a correlation between pound strength and UK-based immigration in the pre 2000 years, but never had the immigration been so great.

Now the British there are finding themselves (often) in a half-renovated house which is unsellable, in a country where the language poses more of a problem than most had anticipated, and where the cost of living has gone well beyond anything that anyone had anticipated. Many are choosing to tough it out, which is probably about the only option now available to them.

When we decided to move to Germany last year, it was already too late to sell. So we put long-term renters in the property and they, at least, are bringing in enough to pay off the mortage which, in early 2010, will have finally run its course.

 

[Monika Berlin]

Hello Monika,

I have been posting here for weeks saying that the overall economic situation in the US and Europe will necessarily take its toll on the property markets here, and that this is definitely NOT the time to invest. I think that in real estate, as with the equity markets, we will need to see some kind of "capitulation" before things begin to level out again. At this point I think that if anything, the drops are accelerating. Only Germany so far seems to be holding out in the current conditions.

The equity mrkets are a good leading indicator of economic turnarounds. They actually tend to bounce back before the economic statistics show any sign of improvement. I think that when this happens, and the upswing in the markets is durable, then that might be the time to jump in again.

As things stand now, news out of the UK, the US, and Spain suggest that this real estate downturn is going to be the most severe one in decades.

I think that the inflation factor could actually prove to be a positive for owners of real estate. House prices always keep up with inflation in the long term. So we might see a 10%-15% jump in real estate just to get back to where we were in purchasing power terms before the downturn.

Thanks neustra,

I feared that much myself. I think you are right though, this looks to be the worst we have seen, at least from what I gathered while sticking my head into various news clips, forums and what not.

Waiting is good, except of course if we know a market is sound in terms of performance and outlook. But then, who would have thought three years ago that Spain would crash so dismally anyway.

 

[Rentoroni]

I was not aware that prices were falling by that much in France, I thought that the property around the world was being hit but not substantial is the countries more detached from the US.

 

[neustria]

News out of Britain is catastrophic, Spain also appears to be in the midst of something very very bad. As for the US...

French prices are down, but I am not in contact with the more recent information coming out of there. Germany, whose market got hit after reunification, didn't go up very much after that, so there, at least, the situation is better.

Europe, unfortunately these days, is not detached fro the US economy. The malaise has spead here through the banking sector, which got burned, as you know, after buying US subprime paper. The banks were therefore weakened, and getting loans for purchases is more problematic now and also more expensive.

 

[neustria]

More Bad News from the US - Fannie & Freddie

The latest story to hit the equity and housing markets is the serious situation now affecting the US traditional mortage lenders in the (this time...) Prime Loan Market. Both Fannie Mae (FNM) and Freddie Mac (FRE) are now considered to be insolvant, having continued to see their revenue situation deteriorate as the housing cycle in the US spiraled ever lower. They are the largest mortgage companies in the country.

Both issue government guaranteed loans, which means that both can be expected to call on the government for help in funding. The companies are quoted on the NYSE and their unlucky shareholders will be the first victims of the current situation.

What makes this worthy of note here is that the Government was already deeply mired down in the Bear Stearns failure earlier this year, when it took a lot of nearly worthess debt on its books to make it possible for the bank to be taken over. Salvaging FRE and FNM in turn could actually affect the credit worthiness of the already alarmingly indebted United States, causing people worldwide to flee US Government paper, or forcing the US to offer higher interest rates on its bonds in order to insure their purchase. The effects of this would be incalculable.

Yet allowing the two most respected mortgage companies in the United States to 'hit the wall' would also have enormous repercussions in the Real Estate markets at home and abroad.

The slide everywhere seems set to continue, and could even accelerate...

 

[neustria]

Deux Sevres (Poitou-Charentes): -30%

In the south Deux-Sevres, in the area roughly located inside the triangle formed by Poitiers, Niort, and Angouleme, a report has it that house prices are now down by "about thirty per cent" but, even so, "nothing is selling".

Real estate agencies, which had sprung up in the smaller communities in the boom years 2000-2006, are now closing up and moving out.

French banks, like the Credit Agricole, which have been burned in the Subprime crisis, are "no longer lending".

The report concluded, "there seems to be no end in sight"

 

[CaroleBay]

Hi Guys

I have just received figures from FNAIM showing price per square metre and changes in prices over the past 12 months to June 2008. Interesting reading.

Some 58 towns/cities are mentioned (too many to list here),but if you would like a copy please let me know.

Kind Regards
Carole Bayliss
mortgagefrance.com

 

[seymour]

The market is slowing dramatically - anybody saying different is dreaming. The general trend is down from here for at least the next few years. It has accelerated in the last 3 months. The inward investment is just not coming and it will dry up further. 4% inflation and we all know what happens next - money goes into deposit accounts, not property. The only way for sellers and agents is to compete for advertising space for the reduced number of buyers - And I know - I see the activity here on a daily basis at what people even look at on our site and for how long, etc.

 

[seymour]

The more I analyze the market the worse it appears for sellers. The demand is drying up with less cheap credit available.

 

[seymour]

Still there will be bargains soon. Those with long term cash to put into property in France will do well but we are talking 10 years. Most who want the quality of life will be paying a premium for a while with such punitive exchange rates.

 

[seymour]

I feel that I am in a reasonable position to know given I work on 5 property websites marketing property in France. Like "french-property-sale.eu" and the top website for south west France. Google it - property south west france.

Lord Rothschild said - the time to invest is when there is blood running in the streets.