French property market growing ahead of elections in May and June

The property market in France is showing signs of recovering well with prices in key cities up across the country and demand growing but elections ahead could slow down the upturn.

The latest data shows that prices in Paris increased by 1.2% month on month in February and by 2.3% in Bordeaux while in Lyon they were up 5.4% year on year.

The figures from Meilleurs Agents also show annual price growth of 2% in Marseille, Montpellier and Toulouse and a rise of 1% in Strasbourg, Lille and Nice. Indeed, in Bordeaux and Lyon prices are now close to their previous peak.

According to the firm’s index report current low interest rates are helping the market as buyers are benefitting from being able to secure good mortgage deals. They are keen to complete on a sale before prices increase further, according to Meilleurs Agents director Sébastien de Lafond.

But the rise in prices is not across the board, with rural areas not seeing the current rise in values. ‘Only good quality properties in urban areas that are close to transport, schools and shops are sought after. The upward momentum is not yet seen in rural areas or in the second homes market,’ he explained.

He believes that the current trend should last for a few months but does not expect prices to accelerate too much with the French elections coming up. ‘The Presidential election in May and the legislative elections in June will open up unknowns. It is difficult to predict what tax changes the next Government might make,’ he added.

Lending brokers French Mortgage Watch also pointed out that the ultra-low interest rate environment is helping to boost the property market and the number of first time buyers in the domestic market are driving the number of sales to their highest level since the economic downturn in 2007.

It too points out that there are considerable regional variations with data from the French Notaires showing that while prices are up in Bordeaux, they have fallen in less popular cities like Limoges. Even in areas popular with overseas buyers, such as the Alps, the higher ski resorts have performed well with either stable or rising prices.

‘Investors have seen good rental returns in the these higher resorts, largely due to variable snowfall over the past few seasons, resulting in extremely high occupancy levels in resorts at 1,800 meters and above,’ said John Luke Busby, private clients director of French Mortgage Watch.

He believes that the current improvement in the French economy will continue to provide a good foundation for house price growth in France generally, but more so in areas where tourism demand is high.

He also revealed that there is a renewed trend of international buyers taking mixed French mortgages; half repayment, half interest only, instead of simply repayment only as these are a clever way of reducing the amount of interest paid overall by structuring a mortgage in a way that enables early repayments without paying the sometimes costly early repayment fees that are associated with long term fixed rate repayment mortgages.

‘Interest only French mortgages often allow for early repayments without penalty fees, so by taking half of the overall lending on an interest only product over 14 years, the buyer has a large chunk of the lending which can be paid off early,’ he explained.

The good mortgage deals are attracting more overseas buyers, according to Tim Swannie of Home Hunts. ‘While we did see fewer British buyers search for second homes after Brexit, many have been searching for permanent residences instead. Other European and American buyers have been plentiful, looking for ways to enhance their investment portfolios and lifestyles at the same time,’ he said.

He also pointed out that French banks offer what is called a back to back loan where you can deposit your money in sterling with them and then you borrow the same amount in euros. ‘This is a perfect solution to avoid taking a hit on exchange rates, as when rates improve in the future, buyers can choose to pay off the mortgage,’ he explained.

The firm has seen a noticeable rise in the number of enquiries from the UK for property in Paris and the French Alps. ‘The majority of these enquiries come from clients who work in finance. Some are looking to relocate closer to Paris or Geneva and others are buying for investment purposes, with a view to relocation in the future,’ added Swannie.

Leggett Immobilier has also seen a rise in enquiries from British buyers, up 34% in the last three months. ‘We’re noting increasing demand from serious buyers, that is those people who have thought carefully about their decision before deciding to buy a home in France,’ said chairman Trevor Leggett.

The firm has also seen increasing demand from French buyers. ‘This would indicate a strengthening market which appears at last to have bottomed out,’ he added.

Enter your e-mail address to receive updates straight to your inbox

I'm interested in..
Your mail preferences