France - Year in retrospective

What are the takeaways of the coronavirus pandemic for the French real estate market

The French property market has been an odd place to be this last year. In common with a number of other European markets, it saw a really hard lockdown in March to May during which the market was effectively frozen. Property visits were forbidden, building sites stopped work, and pretty much the only sales being completed were ones that had already been agreed before the lockdown.

Gradual loosening of restrictions meant that cross-regional travel wasn't freed up till quite late, and the imposition of a new lockdown has kept things subdued.

The Notaries haven't put out Q3 figures yet, but mention that there was strong activity after lockdown with a lot of compromis (the first stage of contract) being signed. Even so, the professionals believe the year as a whole will see transactions fall, with under a million total deals. Prices don't appear to have been affected, though. For resale properties, the Notaires' figures show prices increasing by 5.8% for the year to the end of June, 6.6% in greater Paris and 5.5% in the provinces. Apartments have sold strongly, with price increases of 7% pretty much across the board, while houses have seen lower price rises.

Looking just at the second quarter, there's a huge amount of variation between different markets. Rouen, Bourges, Nimes, Limoges and Bordeaux saw pronounced weakness in the resale market, while other cities such as Amiens and Lille, Toulouse and Montpellier, Lyon and Dijon, and in the north-east, Metz, saw prices rising by 10% or more.

And there's been a bit of a change in the relationship between the centre of Paris and the greater Paris area. The suburbs are now seeing price growth ahead of the city itself, where the EUR 11,000 a sq metre price level seems to be a creating some resistance. Inner suburbs like Saint-Cloud, Sevres, and Meudon are expected to see growth as high as 9%, while even the outer 'Grande Couronne' is beating central Paris price rises.

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Paris and Ile de France market environment

Sales network LaForet has more up to date data, showing prices up just 1% in the four months to the end of September. Their figures confirm that central Paris is no longer on the up, with prices up just 0.4% against 0.9% in the provinces and 1.3% in the Ile de France - the seven departments that surround the city. (Year to date, Paris and Ile de France are almost level pegging, so that suggests central Paris as been weakening as buyers who were locked down in small city-centre apartments put into action their plans to move out to more spacious, leafy suburbs.)

And it's worth considering just how much more you get for your money outside the centre. In Paris, property is selling at EUR 10,547 a square metre; in Ile de France, you only pay EUR 4,299, so you're getting two and a half times more for your money. Add to this the fact that a major new railway line is being created along the Seine to the west, towards Mantes-la-Jolie, plus new tram lines to Saint-Cyr and Saint Germain en Laye, we'd start looking in that direction for good long term potential. The Grand Paris Express, a circular outer ring linking Versailles, Orly, and Charles de Gaulle, will also help making commuting in from the suburbs easier and even more attractive.

Meanwhile, new construction has fallen way behind during the lockdown, with many developments delivered late, and planning permissions down as much as 25%. (We go into this in a lot more detail in the article "Buying new dev in France"). That's helped keep new build prices firm, but it does mean that if you want a new home in one of the major French cities, you may have to look very hard to find the right property.

What's likely to happen to prices from here on?

France has been one of the most generous countries in terms of looking after business owners and workers alike through lockdown; those who have been forced to close their shops or worksites receive compensation, and workers are paid to stay at home to help their employers keep them on. So it's unlikely the residential market will see a lot of distressed property coming on the market in the near term.

However, the market may stay somewhat subdued - at least for resale properties. It's worth noting that investors appear to have pulled their horns in, possibly partly because of the extension of the 'winter truce' under which tenants can't be evicted for any reason to the whole of this year. That said, apparently in many city centres, good apartments let like hot cakes - if you're aiming for a long term investment, yields from 6% to 9% are available, and indeed even higher for properties sold let, though you'll need to avoid towns with obvious problems (like Bethune, where the Bridgestone factory just closed - 3,000 jobs gone in a town with just 24,000 population).

In most areas of France, the market is driven fundamentally by domestic demand. That's different from Spain and Portugal, for instance, where a lot of coastal markets are highly dependent on foreign demand. Look at French coastal or Alpine property and you'll see a lot of French buyers as well as foreigners. And a lot of Parisians right now are considering whether they want a second home, as those who could get out of Paris before lockdown went off to their holiday place and had a much happier time!

Find a property bargain in South of France

Outlook to 2021

And let's look at the underlying basics. Interest rates continue at low levels, though French banks have become choosier about their lending (if you were a borderline credit or a 'difficult' client, such as self-employed with very variable earnings, life has got a lot tougher). And while the economy has stuttered, current forecasts are that 2021 will see France power ahead with over 7% growth before more normal levels of growth resume from mid-2022 onwards.

The government has also announced a huge stimulus package and it's actually pretty detailed, not just pie-in-the-sky. There's EUR 30bn for green initiatives including de-carbonising industry and making homes more energy efficient; EUR 35bn to help companies in strategic sectors; and EUR 35bn for youth employment and training. Any one of these three strands is more than the UK stimulus package in total!

So, if having managed to develop a vaccine (in fact two) to get rid of Covid-19 the world can get back to normal, France looks like managing a pretty rapid recovery. And that should mean property prices get back to normal too…