French Property Prices Stable or Stagnating as Paris Grows?

French Property Prices Stable or Stagnating as Paris Grows?

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The French property market is performing well of late, but one can’t help but draw similarities to the UK where prices rose on low rates and supply throughout 2009 and into the first half of 2010, but fell throughout the second half of 2010 after the government abolished an additional cost on selling houses causing supply to increase.

But the biggest similarity comes from the fact that prices are growing rapidly in Paris, and what some call stability in the rest of France was being called stagnation by the UK’s bears in 2009 as London and the south outgrew the rest of the nation.

Paris apartment prices (per sqm) grew 9.7% in the year to end the third quarter of last year according to the national association of estate agents (FNAIM), while the national institute for statistics and economic studies (INSEE) put growth for the period at 13.8%.

Research also shows strong growth in the areas immediately surrounding the capital, including a 12.07% y-o-y growth in Ile de France — the entire Parisian metropolis not just the city itself –, a 11.6% year on year growth in the Petite Couronne (Little Ring), and a 9.12% growth in the Grande Couronne (Large Ring).

The stark difference between this area and the rest of France cannot be missed in the fact that prices for France as a whole grew just 0.6% during the period.

This is surprising given that the record low interest rates are for the whole of France, and that the mortgage market — which is dominated by fixed rate loans — has continued to grow even during the crisis.

According to INSEE 80% of owner-occupied property in France is currently under a mortgage, and more than 80% of those mortgages are fixed rate. This makes the mortgage sector more stable, and because of this it grew 3.89% during the recession in 2008-09.

The logical answer to the runaway growth of Paris is that people are keen to move into the area because of the current uncertainty in the French economy,