Housing flu at the door step of France

Housing flu at the door step of France

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House prices in France have skyrocketed by about 210% since 1995, making homeowners including 180,000 second home owning Brits well pleased to see their investments soar. But in recent times, the French market appears to have slowed down, from double-digit gains to about 7.2% in 2006 and a sudden fall to the negative at 0.6% in January this year.

Experts and economists attribute this pandemic to the already cooling US property market & economy. Jean-Paul Six, chief Europe economist for Standard & Poor’, was quoted as saying: “I think we will see falling house prices in France during the coming months and that is going to cause headlines. It is the delayed effect of rising interest rates, which have already gone up seven times to 3.75pc, and continue further up.”

In Europe, the boom has not only been restricted to France alone, but Britain, Spain, Ireland, Scandinavia, Holland and Italy have all enjoyed a housing boom of sorts in the past decade. The exceptions to this have been Germany and Switzerland, where the property market has been flat since 1996.

Spain is where the bubble is really evident, with soaring house prices; homeowners have witnessed a rise of about 270% in the last ten years. And with Spanish banks preference for floating rate mortgages or fixed ones, 93% of Spanish mortgages have been issued on this basis. France compared to this, looks as solid as a fortress because French banks normally restrict lending to a maximum of 75% LTV. Another factor to look out for is household debt to disposable income ratio which in France is a mere 65%, whereas in Britain a stout 146%, and Spain a slimmer 115%.

What has emerged from this French property scare is the glut of housing in France, in part due to an overheated construction industry that could well impact negatively on The French property market. Anyone for Croatia? Read more on Telegraph.