New House Sales in France Rise

 Tuesday 15 September 2009
Sales of new properties in France grew by 29% in the second quarter of 2009, and there was also a modest rise in prices.

According to figures released this month from the French government, developers sold nearly 28,000 new housing units in the second quarter of 2009, an increase of nearly a third over the same period in 2008.

Most of this increase can be attributed to the upturn in the sale of apartments, where sales grew by 33% (24,800 against 18,700) in the quarter over the same period in 2008.

By contrast the sale of new houses grew by a more modest 7% (3,000 against 2,800), with the main growth occurring for three bed-roomed houses. The sale of larger four to five bed-roomed homes dropped by 28%.

The increase in sales appears to have been fairly widespread across the country, with sales up in 17 out of the 22 regions in France. The increase was greatest in Paris/Ile de France, Champagne-Ardenne, Centre, Bourgogne, Nord-Pas-de-Calais, and Franche-Comté, where sales were up over 50% on the same period in 2008. Sales were stable in Haute-Normandie, and down in Picardy, Brittany, Poitou-Charentes and Auvergne.

So it is an encouraging if slightly mixed picture, with most commentators of the view that much of the rise can be attributed to the fiscal incentives that the government has put in place to stimulate the market.

These incentives include mortgage tax relief *** on the purchase of the main home. For French residents; loans at zero rate of interest for first time buyers, and tax relief through the Loi Scellier for those prepared to invest in new build private sector properties for rent.

The Loi Scellier appears to have been particularly successful in shifting a large number of properties that have been standing empty.

There was also some signs of an increase in prices. The prices of apartments increased from an average of €3268m² to €3369 m², while the average price of houses increased from €234,000 to €247,000, compared to the first quarter of 2009.

Nevertheless, prices remained down on the comparative period in 2008. Apartment prices were down an average of 1.9% on the same period in 2008, while house prices were down an average of 5.5% over the same period – except for Paris/Ile-de-France and the main Metro areas.

***In the first place, mortgage tax relief is available on the purchase or construction of a main home, for the first 5 years of the loan. The relief is granted at the rate of 40% of interest incurred in the first year, followed by 20% of interest paid for the remaining four years.

Mortgage Interest Rates in France The level of interest rates in France has historically been well below rates in the UK. The significance of this difference should not be underestimated.

On a loan of €100,000, with an interest rate gap of 2%, you might expect to pay around £1000-€1500 a year less with a French mortgage. Over 20 years, therefore, you are going to be paying a lot more in interest payments through remortgaging than would be the case if you took out a mortgage on your French property. Most mortgages in France are granted on a fixed rate basis.