Property sales French property market

Will the upturn in the property market be sustained?

reportNo. 30 - JaNuary 2016

Does the recent and sudden increase in volumes of transactions in the past six months foreshadow a sustainable reversal in the volume and price trend? In other words, has it bottomed out?

Back to FluidityThe recovery observed since the spring of 2015, which has introduced more fluidity in the property market, is being borne out, whereas one could have thought it was a seasonal effect.

However there are disparities between markets and regions, some markets having become seller markets and others buyer markets.

Owner-occupier markets are under pressure, because of a shortage in supply. This is particularly true in the studio flat and one-bedroom market in inner Paris, or the 1/2 bedroom market in the Paris suburbs, where buyers have virtually no bargaining power, but also in certain dynamic provincial towns.

To sustain this fluidity, the eligibility conditions for the new interest-free loan for the resale market - in force since 1st January 2016 - should be more of an incentive, above all for properties under 4,000 euros per square metre in Greater Paris and 2,500 euros in the provinces.

As for investors, they prefer to invest outside the big metropolises where rental yields are higher given the prices.

a deceptive rise

The annual rise in volumes should be put into perspective.

In Greater Paris, over one rolling year, volumes are still 10 to 15% lower than those in the best years of the 1999-2007 period. The same figures for all departments in the French Provinces are still under 8%.

As for prices, while the underlying trend in the past three months is an upward one, it has simply offset the previous six months of price falls. So the prospects are fairly promising, with the beginnings of a turnaround, even though the annual trend is flat-lining.

A real upturn can only be confirmed if the trend continues at this pace.

StoP or more?a set of positive factors

Although we cannot speak of an alignment of the planets, we can perceive a set of positive factors:• interest rates are still low and, should they

rise, potential buyers still undecided should in all likelihood make up their minds before interest rates rise too much;

• supply is still plentiful;• the economic recovery observed in Europe

should inspire renewed confidence.

Buying power

Low interest rates make money cheaper and accentuate the effects of price drops, which may seem insufficient to certain buyers. Low

interest rates help certain people make up their minds, as they now can afford to get on the property ladder, and help others buy a more expensive property.

In addition, this leverage effect is amplified by certain aids, tax incentives in particular. For instance, the Pinel law has had beneficial effects in the new-build market. One can regret however that other tax measures offset such benefits, like the rise in conveyancing costs.

As for investors, in view of recent collapse in stock markets, the low return on financial investments and the high risk of capital loss, we could see stock market investments being transferred to property, which is tangible and considered safer, offering the same rate of return, given the fall in interest rates.

The psychology

The French people's fondness for property has never faltered.

One can wonder whether we are now witnessing what we observed in 2010/2011, when the number of transactions and house prices rose suddenly.

After several months of hesitancy on a market where buyers have put their purchase plans on hold to see how far prices would fall, we now see them deciding to buy more quickly given external factors (rising interest rates, house prices rising again, tax breaks), like a spring that suddenly loses its tension.

There is definitely a recovery, but it only makes up for the deficit recorded in the first few months of 2015; if current market conditions continue, above all its fluidity, 2016 should see a return to volumes comparable with the best years.

French property market

report No. 30 - JaNuary 2016

VariatioN iN NotaireS-iNSee* iNdeXeS

(Base 100 in 1st quarter 2010)

olDer ProPerTIeS olDer aParTMenTS olDer hoUSeS

3 months 1 year 3 months 1 year 3 months 1 year

Mainland france 0.3% -1.7% 0.3% -1.8% 0.4% -1.6%

Greater Paris 0.8% -1.2% 0.7% -1.3% 1.0% -1.1%

french Provinces 0.1% -1.9% -0.1% -2.3% 0.2% -1.7%

* Change over 3 months (seasonally adjusted): between 2nd and 3rd quarter 2015. * Change over 1 year: between 3rd quarter 2014 and 3rd quarter 2015.

* Changes in early indicators based on pre-contracts in France: projection to the end of February 2016.

older apartments

older houses

change over 3 months* -0,7% 0%

change over 1 year* 0,4% 1,4%

lateSt treNdS

annual changeof price per Sq M

Less than -2% -2% to 2% Over 2%

Source: Property databases of Notaires de France (The prices for Greater Paris are valuations from the Notaires-INSEE indexes for the 3rd quarter of 2015)

mediaN PriceS Per SQ m For older aPartmeNtS iN tHe 3rd Quarter oF 2015

Strasbourg€2,450

0.7%Tours€2,110

1.8%

Saint-Étienne€950

-11.7%

Orléans€1,900-0.6%

Grenoble€2,240-1.0%

Clermont-Ferrand€1,660-3.8%Bordeaux

€3,040-0.8%

Bayonne€2,470-4.9%

Montpellier€2,530-2.2%

Toulouse€2,500-1.8%

Nantes€2,500-5.8%

Dijon€2,030-4.5%

Lyon€3,350

0.8%Limoges€1,160

1.4%

Poitiers€1,550-5.9%

Rennes€2,410-1.1%

Caen€1,900-1.2%

Mulhouse€1,020-4.7%

Besançon1,660-4.9%

Marseille€2,320

0.2%

Nice€3,570-0.9%

Réunion€2,040-0.1%

Toulon€2,050-9.6%

Corse-du-Sud€3,000

7.7%

Haute-Corse€2,250

4.0%

Reims€1,970-6.0%

Nancy€1,710-10.0%

Metz€1,760-0.4%

Paris€8,020-0.9%

Lille€2,900-4.2%

Rouen€2,150-2.4%

Amiens€2,020-13.5%

Trend over one year: 1st July to 30th September 2015/1st July to 30th September 2014

Nîmes€1,480-5.7%

French property market

reportNo. 30 - JaNuary 2016

Prices: between rise and stabilizationAccording to the Notaires-INSEE index, in the third quarter of 2015 the prices of older properties in mainland france rose slightly (0.3% compared with the previous quarter in provisional seasonally adjusted figures). Over one year, the fall has eased: older property prices have fallen by 1.7% against 2.7% in the previous quarter. This fall was more marked for flats (-1.8%) than for houses (-1.6%).

In Greater Paris, older property prices picked up in the third quarter (+0.8%, after -0.4%). Over one year, prices are still down, but the rate of the fall is easing: -1.2% compared with the third quarter of 2014, against -2.5% in the second quarter. Prices of flats have fallen slightly more (-1.3%) than house prices (-1.1%).

In the french Provinces, the prices of older properties levelled off in the third quarter of 2015: +0.1%, after -0.5%. Like in Greater Paris, the annual fall is easing: -1.9% compared with the third quarter of 2014, against -2.8% in the second quarter. On the other hand, the fall is still greater for flats (-2.3%) than for houses (-1.7%).

an analysis of median prices per department confirms the trend observed in the last quarter:

•   upturn on the older house market: two thirds of departments show steady or rising prices over one year,

•   fall in older apartment prices: 70% of depart-ments show an annual fall of less than -1%.

In the main towns in the french Provinces the trend is varied for older apartments.•   Prices  in  Saint-Etienne  (-11.7%),  Toulon 

(-9.6%), Nantes (-5.8%), Dijon (-4.5%) and Lille (-4.2%) have been falling for several months.

•   Prices  in  Besançon  (-4.9%),  Montpellier (-2.2%) and Toulouse (-1.8%) fell this quarter, unlike the previous one; Toulouse had experienced four quarters of price rises.

•   Elsewhere, prices are steady.

In the main french provincial conurbations the trend in older houses is also varied, even though one observes more rises than for houses than for flats.•   Seven conurbations show a fall: Besançon 

(-10.6%), Toulon (-6.7%), Nice (-5.5%), Dijon (-4.8%), Nantes (-4.5%), Marseille-Aix-en-Provence (-3%) and Lyon (-1.7%). Apart from Toulon and Nantes, where prices rose in the second quarter of 2015, these conurbations also showed price falls in the previous quarter.

•   Prices in nine conurbations are steady or up: Orléans (-0.2%), Montpellier (0%), Toulouse (+1.5%), Strasbourg (+1.8%), Bordeaux (+2%), Rennes (+2.5%), Grenoble (+3.6%), Saint-Étienne (+6%) and Lille (+6.6%).

Provisional sale agreements: price rises for housesFor the beginning of 2016, early indicators based on provisional sale agreements show a slight rise in prices. At the end of February 2016, the year-on-year trend is +0.4% for older apartments and +1.4% for older houses in mainland France.

In Paris, prices are not expected to change much in the coming months. In the nearby suburbs, prices of flats per sq m are expected to fall to their level of one year ago. On the other hand, the prices of houses in the outer suburbs is expected to rise by nearly 4% in one year in January 2016.

Volumes: sharp riseThe upturn in the annual volume of transactions, which started in mid-2015, is increasingly noticeable: in November 2015, the number of transactions completed in the last twelve months is estimated at 792,000, up 12.5% over one year. Such a rise has not been seen since the spring of 2012.

tHe reSale market

Bourges€1,230-9.8%

mediaN SelliNg Price For older HouSeS iN tHe 3rd Quarter oF 2015

Trend over one year: 1st July to 30th September 2015/1st July to 30th September 2014The statistics for houses concern the whole urban area (town centre + suburbs)

annual changeof the selling price

Less than -2% -2% to 2% Over than 2%

Source: Property databases of Notaires de France (The prices for Greater Paris are valuations from the Notaires-INSEE indexes for the 3rd quarter of 2015)

Rouen€167,500

-2.0%

Reims€215,500

6.4%

Lille€190,000

6.6%

Brest€166,700

-0.2%

Nantes€252,500

-4.5%

Poitiers€156,000

-2.7%

Bordeaux€270,000

2.0%

Angers€207,100

-1.2%

Montauban€183,000

7.0%

Toulouse€274,000

1.5%Montpellier€320,000

0.0%

Marseille / Aix-en-Provence

€314,200-3.0%

Orléans€197,200

-0.2%

Toulon€334,600

-6.7%

Tours€210,000

-4.1%

Chartres€185,000

-9.3%

Lyon€311,800

-1.7%

Le Havre€166,000

6.5%

Grenoble€339,000

3.6%

Saint-Étienne€186,000

6.0%

Metz€190,400

1.8%

Nancy€170,000

-5.9%Troyes

€161,5002.0%

Réunion€212,500

11.8%

Châteauroux€115,500

-11.5%

Greater Paris (Ile-de-France)

€296,700-1.1%

Caen€185,000

-5.1%

Dijon€212,900

-4.8%

Limoges€142,300

-5.8%

Amiens€168.000

0.0%

French property market

report No. 30 - JaNuary 2016

Nîmes€201,500

-2.7%

According to the Sit@del2 database (excerpt from CGDD report no. 712 of March 20151), “from September to November 2015, the number of approved new builds in seasonally-adjusted figures and business days rose by 2.7% in France compared with the three previous months. Building approvals for single-family dwellings have fallen by 3.7%, whereas approvals for multi-dwelling buildings (including blocks of luxury flats) are up 7.4%.

Over the same period, the number of housing starts fell by 4.1%. Construction start-ups for single-family dwellings are down 0.8%, and those for multi-dwelling buildings (including blocks of luxury flats) are down 6.1%.

In cumulative figures over a 12 month period, the number of housing starts is stable (351,200)."

According to the CGDD ecln survey (taken from Report No. 698 dated November 2015) on the property development market "in the third quarter of 2015, 22,600 new homes were reserved, 16% more than in the third quarter of 2014. This increase was more marked in the multi-occupancy buildings (+16.9%) than in individual dwellings (+7.3%). In parallel, offers for sale are rising (+2.7%), albeit more

slowly. So current offers for sale is down to 98,800 dwellings at the end of the quarter.

The average selling price of flats per square metre was up compared with the third quarter of 2014 in six regions of mainland France. In total, the average price of reservations is marking time in France."

As far as the non-project house builder market is concerned, according to Markémétron2 (taken from the report for September 2015), “for the ninth month running, the number of gross sales of non-project houses by builders in our sample rose compared with the corresponding month in 2014 (+15%). In the third quarter of 2015, gross sales by builders in our sample grew by 21% compared with the same period in 2014.

Over the past 12 months, the number of gross sales of non-project houses totalled approximately 111,000 units, up 10% compared with the previous 12 months. "

mortgagesAccording to Banque de france figures of October 2015 (taken from Stat Info dated 3 December 2015), “the number of new

home loans (seasonally-adjusted figures) fell significantly in October, mainly due to the number of renegotiated loans. The interest rates on long-term fixed-rate home loans is still rising slightly since the inflection of August 2015 (2.27%, after 2.23% in September)”.

1 General Commissariat for Sustainable Development.2 Indicator of sales of non-project houses produced by Caron Marketing.

tHe NeW HouSiNg market

leNdiNg rate: 2.27%

favourable unfavourable

e

Whereas the number of transactions for older properties rose sharply in 2015, the proportion of non-resident foreign buyers fell sharply: after peaking at 2.8% in 2006-07, it fell to 1.4% in 2014 and even to 1% in 2015, according to provisional figures in notaries' records. In Greater Paris the proportion of non-resident foreigners has remained fairly stable for 10 years, around 1%, and unlike the French Provinces, it rose slightly in 2015. Companies, property investment partnerships in particular, are excluded, but there is nothing to indicate that non-resident foreigners are keener to for property investment partnerships than in the past.

On average, between 2005-2014, Britons, Italians and Belgians together represented nearly 60% of non-resident foreign buyers; the British alone making up nearly one third of them (figure 1). In the West and Centre of France, the British significantly outnumber other nationalities, followed by the Belgians. In the North-East, the Alps and Provence/Côte d’Azur/Corsica, they rival other nationals of bordering countries, with the notable exception of the Germans. In Greater Paris, the main nationalities represented are both different and more diversified than in other regions: after the Italians, who are by far the most numerous, Americans and Britons are closely followed by Algerians (6%) and Moroccans (4%).

The proportion of the four nationalities most widely represented at national level among non-resident foreign buyers - British, Belgian, Italian and Swiss - changed differently between 2005 and 2014 (graph 1).

The British still outnumber other nationalities, despite a fall of 15 points between 2005 and 2014. In the Centre and West, where they are the greatest in number, their percentage fell by 10 points between 2005 and 2014, and by more than 20 on the west coast and in the Massif Central. However, by and large we observe a significant upturn between 2011 and 2014: their percentage rose by nearly 9 points to 29% in 2014.

Conversely, despite a slight fall since 2013, the proportion of Belgians has constantly grown since 2005, most noticeably in the North-Est, South and South-West. Indeed they have been greater in number than the Italians since 2012. The latter have lost over 10 points' market share since 2009, chiefly in Provence/Côte d’Azur/Corsica.

Non-resident Italians tend more to sell to one another than other nationalities: nearly one out of three non-resident buyers (31%) purchase from an Italian vendor, against only 8% of Belgians. This trend is also observed with the British (26%), whereas only 12% of Swiss deal with vendors of the same nationality.

Complete study available at notaires.fr, Dinamic section.

Property salesNon-resident foreigners purchasing accommodation in mainland France

Visitwww.notaires.fr to view all our reports on the current property market

Contact: Training and Development Department, Notarial Supreme Council

Editorial committee: Didier Coiffard, Thierry Thomas, Christine Rey Du Boissieu, Caroline Gaffet, François Proost and Claude Taffin, Scientific Director, DINAMIC

Publication director : Isabelle Mariano

Published by: Conseil supérieur du notariat 60, boulevard de La Tour-Maubourg - 75007 Paris Tel.: 01.44.90.30.00 - www.notaires.fr

Production: Publi.not

Page layout, printing: Groupe Drouin Maître Imprimeur - 04 73 26 44 50

ISSN: 2100-241X - Photo credits: Fotolia

Figure 1: Proportion of non-resident foreign buyers and most widely represented nationalities by geographical area (mainland France, from 2015 to 2014)

Graph 1: Trends in the four nationalities most

widely represented among non-resident

foreign buyers (mainland France,

from 2005 to 2014)

Social security contributions of non-residentsAfter a ruling of the European Court of Justice against France, its Ministry of Finance issued an official communiqué on 20 October 2015, admitting that social security contributions were no longer payable on capital gains made by non-residents registered in a social security system in the EU, the European Economic Area (EEA) or Switzerland. Non-residents who have paid them have two years (plus the year of payment) in which to claim a refund.

But since 1st January 2016, this relaxing of the law has been reversed, because article 24 of the Social Security Finance Law for 2016, passed on 21 December 2015, once again charges social security contributions on all non-residents' capital income.

Whole of france

United Kingdom 32.6%

italy 15.3%

BelgiUm 11.1%

other non-eU coUntries 9.0%

switzerland 5.9%

netherlands 4.8%

other eU coUntries 4.7%

denmarK/sweden/norway 4.5%

germany 3.9%

spain/portUgal 3.5%

ireland 2.6%

United states 2.1%

% of non-residentforeigners

Over 5%3% to 5%2% to 3%Under 2%

British: 32%Swiss: 22%Belgian: 12%

British: 78%Belgian: 6%Dutch: 5%

British: 42%Belgian: 15%Spanish/Portuguese: 12%

Belgian: 28%British: 17%Dutch: 14%

British: 63%Belgian: 13%Dutch: 13%

British: 72%Belgian: 10%German: 3%

Italian: 38%British: 15%Danish/Swedish/Norwegian: 12%

Italian: 20%American: 8%British: 7%

44%

20%27%

14% 22%

10%6%

17%

13%

5%10% 6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

United Kingdom Italy Belgium Switzerland

French property market

reportNo. 30 - JaNuary 2016