Review of the French real estate market for 2010 and outlook for 2011
The real estate market for 2010
Falling house prices observed in 2008 and 2009 gave way to further upward pressure:
-When they were down -3.1% in 2008 and -4.9% in 2009 , housing prices have averaged
increased +1.5% in 2010
-From their low point observed in Q1 2009 (2345 € / m² on average throughout France), they even recorded an increase of +5.3% at end 2010 (2469 € / m² on average over France in the 4th quarter 2010) ;
-Strongest on the market for apartments: +7.6% between the 1st and 4th T09 T 2010
-And more moderate on the market for houses: +3.0% between the 1st and 4th T09 T 2010
-House prices have throughout the country found their levels seen in early 2006-it is like “if they had remained flat for 5 years! “;
– Paris is not France: after an increase of +15.7% in 2010 (last 12 months compared to the last 12 months) they have reached a record level: € 7,645 / m² on average in Q4 2010 (ie an increase of +24.1% qoq annual (4T2010/4T2009)! Since 2006, they have thus continued to grow by an average of +4.4% annually.
Credit conditions have once again supported the conditions for expressing demand .
A lower interest rate of -1.5 percentage points between 1st quarter 2009 and fourth quarter 2010. A personal contribution and borrowed capital constant, the rates will result in:
-Lower monthly payments -12.5%
-An increase of +14.5% of the debt capacity of the borrower (or € 43,038 for 300 000 €)
Between Q1. 2000 and 4th quarter. 2010 , the housing prices have appreciated old averaged 1.5% per quarter, or +6.0% per year . At the same time, the repayment burden for a principal amount plus this development has increased by only +0.6% per quarter, or +2.6% per year , thanks to falling interest rates and lengthening the duration.
The event, always held by two strong government incentives, has continued its recovery:
-Tax credit on mortgage interest and PTZ (more than 200,000 loans in 2010) have fully played their role.
-Relaxation of the resale market clearly observed in September is confirmed.
Following its decline by nearly 30% observed during the years 2008 and 2009, the upturn has strengthened during the year 2010 to exceed the threshold of 700 000 operations (+25%).
-A result confirmed by the marked increase in loan production should reach 112 billion euros (or an annual increase of +27.3% compared to 2009).
However, only 2 of 10 French believe they can find a property that suits them within 3 months.
Unfortunately, all the fundamentals that support the economy are not green:
Outlook- growth limited (+1.4%)
– unemployment is still above the threshold of 9.0%
Low-earnings purchasing power (+1.4%) despite low inflation (excluding energy prices)
-Pressure on bond markets in the medium and long term that support the hypothesis of a probable
rising interest rates,
-Weak consumer confidence …
Thus, even if the property could be “a safe haven in 2011,” we fear that agencies may face from the first half of this year to a wait-market linked to the hesitations on the evolution prices and, in the second half, with softening activity, reflecting pressure on the rates (not to mention the pre-electoral expectations growing).
However, if all the indicators confirm that the conditions for expressing demand are always
“Historically” good (solvency of households reported monthly gross disposable income, power of leverage – cf. Appendix 2), there is no reason a priori, a further decline today “possible prices .
The relaxation of the multi-accession should, through the provision of additional supply, slow movement of price increases in double digits.
In this context, prices are expected to grow between +3.0% (low estimate – with a higher rate than 2 points) and +6.0% (high estimate) in 2011 , the high hypothesis is supported by a rise in interest rates which, if it occurs, should not exceed 1.5 points.
Moreover, it is hoped that the goal of distributing 380,000 free loans from the Government, if it occurs and is maintained (see inflationary nature of the measure), restore market confidence and will then play a full role of “shock.” In these circumstances, and in support of a thinning of the resale market, activity in the market would regain its former level left in 2007 to mark the 800 000 operations .