Prices continue to fall in Paris, with apartment prices declining by 1.22% (-1.84% inflation-adjusted) during the year to Q2 2014, falling to €8,120 (US$ 10,269) per square metre (sq. m.), the fifth consecutive quarterly price drop, according to La Chambre des Notaires de Paris.
- In Ile-de-France, the wealthiest and the most populated region in France, the average apartment price fell by 1.47% y-o-y (-2.08% inflation-adjusted) to €5,380 (US$ 6,804) per sq. m. in Q2 2014.
- In the Petite Couronne (Small Crown), the average price of apartments fell by 1.36% y-o-y (-1.98% inflation-adjusted) to €4,340 (US$ 5,488) per sq. m.
- In the Grande Couronne (Great Crown), the average price of apartments dropped by 2.28% y-o-y (-2.89% inflation-adjusted) to €3,000 (US$ 3,794) per sq. m.
Analysis of France Residential Property Market »
The average price per sq. m. of apartments ranges from EUR 11,000 to EUR 12,000. Smaller apartments tend to cost more.
The average monthly rent per sq. m. ranges from EUR 32 to EUR 38. Smaller apartments also tend to cost more.
Capital Gains: Capital gains are generally taxed at 19%. Capital gains tax is levied at 33.33% for non-EU citizens.
Inheritance: French private international law uses the standard double rule on inheritance: the law of the deceased’s domicile applies to moveable assets, and the law of the location of the property applies to immoveable assets.
Residents: French residents are taxed on their global income at progressive rates, from 5.5% to 41%.
Rent: Though the initial rent can be freely agreed, the rent can only be revised once a year, and not more than the increase in the (new) INSEE rental index. In combination with a highly restrictive contract structure, this means that rentals of old apartments have tended to drag well behind new rentals and prices.
Tenant Security: An unfurnished property contract has, as a minimum, a three-year term, though furnished property contracts may be for one year. In both cases, even when the contract ends, the owner can only recover the property if he or a family member intends to live there, or he intends to sell. In addition, eviction through the legal system takes a long time.
The pain continues. The French economy recorded no growth in 2012, as firms slashed thousands of jobs and President Francois Hollande squeezed the budget deficit. In 2013, real GDP growth was estimated at a meagre 0.1%. “This is obviously not enough,” said French Finance Minister Pierre Moscovici.
In May 2012 Francois Hollande became the country’s first Socialist president since Francois Mitterand (1981-1995), In August 2014, France entered political turmoil triggered by Economy Minister Arnaud Montebourg's demand for an end austerity policies. Montebourg demanded a fiscal stimulus to boost growth, arguing that France shouldn’t be “slavish” and “dogmatic” in pursuing deficit cuts.
Although President Hollande has an all-time low approval rating of 17%, he asked Manuel Valls, Prime Minister since March 2014, to form a new government “consistent with the direction set for the country”. In the new French cabinet Montebourg was replaced as Economy Minister by Emmanuel Macron, a former investment banker at Rothschild. Michel Sapin, a career politician, was appointed Finance Minister, all of which signals a determination to continue France's present austerity policies.
From 2004 to 2007, the French economy expanded by an average 2.3% per year. However, the economy contracted by 0.08% in 2008, and declined again by another 3.1% in 2009, France’s sharpest recession since World War II. Despite the worsening eurozone debt crisis, the French economy managed to expand by 1.7% in 2010 and by another 2% in 2011.
Due to the first two quarters' disappointing figures, Finance Minister Sapin reduced the government’s growth forecast for 2014 to 0.5%, from the previous estimate of 1%. In 2015, economic growth is expected to be around 1%.
INSEE has noted that business confidence levels in France are even lower than in Spain or Germany. France’s expected growth in 2014 is only half of the bloc’s economic forecast of around 0.8%.
Aside from low growth in 2014, INSEE also expects unemployment to be 10.3% by the end of 2014. High unemployment is one of France’s major problems. As of July 2014, unemployment rate was 10.5%, up from 10.2% in July 2013, one of the highest increases in the eurozone.
In August 2014, annual inflation eased to 0.4%, well below the 0.9% inflation recorded in the same month last year.
Public debt is expected to hit a record 95.1% of GDP this year, up dramatically from 85.8% of GDP in 2011, and far higher than previous estimates. France’s public deficit reached 4.1% of GDP in 2013, down from 4.8% of GDP in 2012 but higher than its EU-agreed target for 2013. The government aims for a 3.6% of GDP deficit this year, by tightening spending of local authorities and ministries. About €15 billion is expected to be saved this year through austerity measures.