Safe haven reputation boosts French property sales

Published on 23 November 2015

Safe haven reputation boosts French property sales: how the real estate market has withstood the financial crisis.

While the Spanish and US real-estate markets declined significantly after the Lehman Brothers collapse in 2008, the French property market dipped only slightly, and only briefly, before a Paris-led resurgence in 2009. With prices dropping in the third quarter of 2008, hitting a notable low in the second quarter of 2009, before rising well above pre-crisis levels in the final quarter of 2010.

Stable markets and safe havens

The safe haven effect was first evident in 2010 when investors collectively began avoiding the risk-laden financial markets in favour of the more stable property market. Fuelled in part by a lack of buildable land and regulatory impositions on new building projects, there were also social and demographic factors that inspired the property investment trend. The policy of French banking institutions of lending according to the ability to repay – rather than, as in Spain, the potential future value of the property as an asset – ensured the preservation of household solvency. 

Tax breaks for buy-to-let properties

Low interest rates multiplied the effect of governmental measures over demand, and credit did not generally exceed one third of a household’s income, with most property loans and mortgages accompanied by maximum loan periods of 25 years and fixed rates of interest. A key measure that has supported the market is the Scellier law, which reduces the tax implications for purchasers of newly built buy-to-let properties.

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