French Property Values Remain Buoyant
Over the last decade the world property market for second home ownership has seen unprecedented growth, both in well established markets and also in regions such as former Eastern block previously overlooked as holiday destinations but were promoted as low risk investment opportunities. However as with all property booms, this extraordinary period of growth was followed by the inevitable bust. The metaphoric rug was suddenly and brutally pulled from under the feet of many investors due to the worldwide credit crunch, leaving thousands of people with a property that they can’t sell and a big hole in their finances.
Over the last couple of years there have been many predictions on whether property markets will continue to fall and which countries are on the brink of recovery. What most pundits do agree on is that the French property market seems to have been relatively unscathed.
This is comforting news for those who have already invested in French property, regardless of whether bought as an investment or for the family to use at leisure, no one wants to see a drop in value through no fault of their own, particularly when looked after and fully covered by holiday home insurance. France has been lucky that the expected huge drop in prices during 2008 and 2009 didn’t happen and on the contrary according to the French Federation of Estate Agents the market even saw a small increase of 0.6% at the beginning of the year.
So why have the French managed to avoid the catastrophic price fluctuations experienced by markets such as the USA and UK? A common mistake is to assume that all markets are the same, when there are both cultural and financial differences that shape the market.
Although much of Frances property is purchased by foreigners, investors tend to be looking for a long-term commitment and will therefore, they will wait for the market to rise rather than drop the sale price.
This is partly due to high purchase and sales taxes involved when buying a French property, making it more financially prudent to hold on to an investment for longer. Also culturally the French buy property at a later age, hang on to them and pass on to family members, making long term property ownership the usual practice, which in turns keeps the supply of property relatively stable without the prospect of a sudden flood of available property.
One major factor in preventing the boom and bust mentality is that French banks are more circumspect about conspicuous lending, which has prevented the French from being caught in the cycle of increased demand, inflated prices and then a sharp drop, when the credit dries up.
