The growing French market for new properties
After seven years in a crisis, the market for new properties is improving with support from the new Pinel tax scheme.
The new-build market in France is improving. For the third consecutive quarter, the Observatory for the Federation of Property Developers in France (l’Observatoire de la Fédération des promoteurs immobiliers de France: FPI) has recorded an improvement in the sales of new properties: an increase of 19.3% in total sales between the first half of 2014 and the first half of 2015. This rebound accelerated in the last trimester (with an increase of 23.1%) with a total of 30,764 new property reservations.
The figures provided by the FPI confirm the reassuring statistics published by the Minister for Housing in France, who declared an increase of 21.8% in new-property sales in the same period. This improvement can be explained by the leap of 66.2% of sales to investors since the beginning of the year, according to the FPI.
In effect since the 1st January, Pinel tax exemption scheme is more appealing than Duflot, its predecessor, which generated little interest from investors. As it is more flexible because it allows the contract holder to choose between three durations (6, 9 or 12 years), this rental investment incentive scheme also offers the possibility of letting the property to a family member (a parent or child). According to the FPI, weak interest rates have stimulated the demand for this measure.
Recovery of the Home-ownership market
However, the French government’s efforts to stimulate home-ownership investment, the results are not yet as promising as they would hope. Despite the interest-free and state-subsidised loans available, homeownership has seen an increase of just 5% in relation to the first half of 2014; a timid progression which is explained by the high prices of new properties which limit flexibility for first-time buyers, according to the Cercle de l’Epargne.
Therefore, the FPI has confirmed that the movement towards higher house prices demonstrates a sign of strain between supply and demand. Furthermore, adds the FPI, the situation is strongly mixed within the local markets. In addition, demand could accelerate in the months to come. According to the Bank of France (la Banque de France), in fact, the rise in outstanding house loans, which is not influenced by the renegociations, has increased by 3.5% in July after an increase of 3.3% in June. In July, the production of new house loans reached the highest level since January 2003 (some €21.2bn, previously €18.6bn).
The recovery must be sustained
The brighter prospects for demand, provoked by the Pinel scheme, must not hide the global fragility of the sector, warns the FPI. Home ownership is still in a precarious position. In particular, the levels of homes for sale is exceptionally low in comparison with the levels in 2014. However, perspectives are favourable in the wake of the expected economic recovery of the French economy, considering that the property market is very dependent on the economic climate and confidence. A lasting improvement in employment and a gradual increase of revenue would have a positive impact given that interest levels are set to remain low for the next year, if not longer.
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