French Property Prices to Fall Everywhere in 2009

According to the French National Federation of Real Estate (la Fédération nationale de l’immobilier or Fnaim) prices are expected to fall all over France in 2009. No surprises here, but the spokesman, René Pallincourt, was typically upbeat, suggesting that prices had only fallen 3.1% in 2008, and would only fall another 10% in 2009.

At best, this is an extremely optimistic forecast. Prices fell nearly 10% in the fourth quarter of 2008 alone, with much larger falls in areas traditionally sought after by British buyers. Mr. Pallincourt was honest enough to admit that, “This has affected the whole country.”

Being a little more realistic, “It’s time to buy,” says Patrick-Michel Khider, co-chair of the network Laforêt, who believes that the most affected by the fall will be those between 120 000 and 250 000E. “The market still needs a market with many people who buy and sell that are pressed.” After three months on the market, a 3-bedroom apartment in Châlons-en-Champagne previously priced at 100,000E was sold beginning January for E75 000, 25% lower than the original price, and is a far more realistic assessment of the price reductions we have been seeing. Clearly, it is in the interests of the FNAIM to paint a rosy picture, but one must be careful not to stall the market by creating unreasonable expectations on the part of the seller. This has caused a major deadlock in Spain’s property market, with estate agents insisting prices have remained steady in the face of massive over-supply and falling sale prices.  Prices have already fallen by around 25% in many areas of France, and with the pound/euro exchange rate where it is, we recommend keeping a property if you have one, especially of you are looking for English buyers.

Property prices to fall in Paris

Mr. Khider also suggested that prices in Paris will fall an average of 7%, although some neighborhoods will see larger drops such as in the 14th and 18th districts.

Normandy, Dordogne and Provence are all suffering dramatic price reductions with the British pound at an all-time low against the Euro, and this trend will likely continue throughout 2009. Even such bastions of price solidity as the Cote D’Azur are seeing dramatic falls in property prices. It is worth remembering that prices on the Cote D’Azur fell around 40% during the last recession, and we hazard a wild, speculative guess based solely on the anecdotal evidence that a few banks might be in trouble, that this one is much, much bigger. With super yachts being taken out of the water and staff being dismissed for the summer, combined with British and Russian expats returning home to deal with the home grown financial issues, expect some bargains along the coast end-2009.

It is unrealistic to assume that the world financial crisis and corresponding fall in asset values will pass any markets by this year. We expect the hardest hit sectors to be the regions that experienced the biggest price growth over the last decade. This is good news for buyers with cash or financing in place, although with the British pound extremely weak, a fall of 30% represents no change in price for buyers with pounds. We expect prices to fall by around 50% in 2009 and continue to decline through 2010, along with the rest of the world. Immune – France is not.