In the face of all time low French mortgage rates a recent speech from the International Monetary Fund (IMF) hinted at the fear of a “housing bubble.”
This was met with a firm statement from industry professionals: “I’m can say quite categorically, there is no bubble,” says Sebastien de Lafon, CEO MeilleursAgents.com. “And this if for two reasons: there is no speculation on housing, that is to say, not ‘actors’ who only buy to resell, and no credit risk, that is, excessive leverage in real estate.”
“Banks remain cautious in not lending to non-creditworthy buyers, and only to households whose incomes are secured by two permanent contracts or officials.”
French mortgage rates have dropped significantly in the first half of 2014, falling to a record low of the past forty years: 2.85% in May, down 23 basis points since January 1st. “Not since the late 1940s have lending rates been so affordable”, says the Observatory mortgage organisation.
But in fact “the rates are not that low when compared to low inflation, which is at 0.7%. In real terms, bank margins are far from zero.” Puts Claude Taffin, economist, founder of Dynamic real estate consultants.
We’d have to agree, as whilst lending is very affordable, France’s controls over who they lend to have already proven to be a strong defence against market movements, as the country was one of the first to emerge from the 2008 slump. This has always made France a very unlikely place for a housing bubble and it will be the same in the future.