French property transactions stabilise near record highs with outlook bright for 2019

Property Prices

Overview

2017 saw a record number of transactions in France at 960,000. This number has dropped only slightly to 957,000 in 2018. The forecast for 2019 would seem to be continued volume at these levels as the main conditions are all set to stay the same; ultra low interest rates, slow price rises and high turnover of property.

Slow Price rises

The average price increase across France in 2018 was 2.9%, which is a relatively slow and stable growth rate which we have been accustomed to over the past 20 years. Of course, there are always local variations and in recent times a lot of the stronger growth has been coming from Bordeaux and Lyon. Last year was no exception with Bordeaux registering growth of 9% and Lyons 6%. Paris and the other big brand name ski stations kept pace with the average whilst growth was more anemic along the Cote d’Azur.

Ultra low rates

The main driver of this continued growth across the majority of the country is of course the low interest rate offering which saw the average effective mortgage rate in France drop to its lowest ever rate of 1.5% in November. At the same time, the amount of outstanding loans in France has reached an all time high of just over 1,000 billion euros. At the time the rate of inflation in France was 1.9% meaning that the real cost of borrowing was below inflation which is a rare event in a rising market. Since then, inflation has fallen to 1.2% in January yet the 1.5% fixes available for 20 years at a net 70% Loan To Value still looks incredibly attractive.

High turnover of property

Paris is the standout example where demand is extremely high currently. In central Paris, agents have approximately 20 clients for the most common property search enquiry, such as a 3 bed property at €3M or a 2 bed at €1.8M. There is a lack of stock which is affecting buyers and agents alike with properties not staying on the market for very long, sometimes only long enough for a visit of the apartment by video link at which point an offer is made. The same is true for well priced, well located in many other regions where the Brits like to buy.

British buyers still number 1

Of the 957,000 transactions over 55,000 were made by foreign buyers, up to 5.9% from 5.7% the previous year. Whilst the number of Brits buying as a proportion of it is down from 33% in 2016, British buyers still account for 25% and, as they have been for the last 10 years, remain the largest group of international buyers in France representing close to 14,000 transactions each year. The reduction has most likely been the result of the EU Referendum but we can still see large strength from British based buyers with 65% of British buyers not resident in France at the time of purchase.

For more insights about the real estate climate in France and to receive advice on cross-border transactions and finance, don’t hesitate to get in touch.