In Metropolitan France, house prices fell by 1.64% during the year to end-Q3 2013, its sixth consecutive quarter of year-on-year declines, according to the National Institute for Statistical and Economic Studies (INSEE). When adjusted for inflation, house prices actually dropped by 2.57% over the same period. On a quarterly basis, house prices in Metropolitan France increased 1.12% (1.03% inflation-adjusted) in Q3 2013.
In Ile-de-France, the wealthiest and the most populated region of France, the average apartment price dropped by 1.6% (-2.5% inflation-adjusted) y-o-y to €5,510 per square meter (sq. m.) in Q3 2013 from a year earlier, based on figures released by La Chambre des Notaires de Paris.
- In Paris, apartment prices dropped by 2.1% (-3.1% inflation-adjusted) y-o-y to an average of €8,260 per sq. m. in Q3 2013.
- In the Petite Couronne (Small Crown), the average price of apartments fell by 1.3% y-o-y (-2.3% inflation-adjusted) to €4,420 per sq. m. in Q3 2013.
- In the Grande Couronne (Great Crown), the average price of apartments dropped by 0.6% (-1.6% inflation-adjusted) to €3,110 per sq. m. in Q3 2013 from a year ago.
During the housing boom (1997-2007) French house prices surged by 150% (112.5% inflation-adjusted). However, the housing market started to weaken in 2008, mainly due to the global crisis. House prices fell by 3.82% (-5.58% inflation-adjusted) in 2008 and by another 4.07% (-4.36% inflation-adjusted) in 2009.
The housing market bounced back strongly in 2010, with house prices rising by 7.57% (5.85%). In 2011, the housing market started to slow, with house prices rising by just 3.66% (1.14% inflation-adjusted), mainly due to the adverse impact of the eurozone debt crisis. In 2012, house prices dropped again by 2.08% (-3.58% inflation-adjusted) from a year earlier.
From January to November 2013, the total number of existing homes sold in France fell slightly by 1.7% to 701,000 units from the same period last year, according to the Conseil général de I'environnement et du développement durable (CGEDD).
However, demand is already rising in some prominent areas. In Q3 2013, the total number of existing home sales in Paris rose by 13% from the same period last year, according to La Chambre des Notaires de Paris. Likewise, sales of existing homes also increased in Petite Couronne (15%), Grande Couronne (14%) and Ile-de-France (14%) over the same period.
Residential construction activity remains down. The total number of house permits issued in France fell by 12.6% to 432,885 units in 2013 from the previous year, according to the Ministère de l’Écologie, du Développement Durable et de l'Énergie. Likewise, the total number of houses started also dropped 4.2%, to 331,867 units in 2013 from a year earlier.
As in the past two years, France’s housing market is expected to experience modest house price falls in 2014, according to local real estate agents. "If interest rate [for] mortgages remain stable, there will be less than 2% decline [in 2014],” says Laurent Vimont , CEO of Century 21.
In the fourth quarter of 2013, the French economy, the eurozone’s second largest economy, expanded by 0.3% from the previous quarter, an improvement from the 0.1% contraction recorded in the previous quarter, according to INSEE. In 2013, real GDP growth was estimated at 0.1%, after almost no growth in 2012. In 2014, the economy was expected to expand by 0.9%.
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 deceasedís 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.
However, the economy contracted by 0.08% in 2008, due to the global crisis. Real GDP 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.
Yet the French economy recorded no growth in 2012, as firms slashed thousands of jobs and President Francois Hollande squeezed the budget deficit, according to National Institute for Statistical and Economic Studies (INSEE).
In 2013, real GDP growth was estimated at a meagre 0.1%. “This is obviously not enough,” said French Finance Minister Pierre Moscovici.
The government revised its economic growth forecast for 2014 down to 0.9% from the initial forecast of 1.2%. The French economy is projected to grow by 0.1% in Q1 2014 and 0.7% in Q2 2014, according to INSEE.
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.
France’s high unemployment is another problem. The jobless rate reached 11.1% in December 2013, up from 10.6% in a year earlier and the highest level since Q2 1999. In November 2013, the total number of unemployed persons in France rose to about 3,293,000. French unemployment is expected to stabilize at about 11% in the second quarter of 2014, based on estimates released by INSEE.
Inflation stood at 0.7% in January 2014, according to INSEE.
In May 2012 Francois Hollande became the country’s first Socialist president since Francois Mitterand (1981-1995), beating incumbent Nicolas Sarkozy. His government is now struggling with weak economic growth, poor competitiveness, a record high jobless rate and overall economic uncertainty.
In November 2014, international ratings agency Standard and Poor’s lowered its ratings for French sovereign debt, as doubts increased over the effectiveness of Hollande’s policies.