Investors Return to New Property in France

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For the first time in months, new-build property sales in France are up 20% generally, with a 59% increase in the investors’ market, though first-buyers are still thin on the ground

After several long months in the red, new home sales in France have shown a significant increase in the first trimester. Is this the turning point finally for the beleaguered French construction industry? The French developers’ umbrella organisation FPI (Fédération des Promoteurs Immobiliers) is not throwing any celebration parties just yet.

“These are clearly investors that are the main force behind the rise, as the 59% jump in investor sales indicates,” says FPI president François Payelle. “This proves that the Pinel incentive scheme (named after a tax incentive introduced in January of this year by Housing Minister Sylvia Pinel) is working and is bringing confidence back to the investor market. But home ownership is still stagnant.”

If the recovery continues, the year could end up yielding 85,000 or 90,000 home sales in France in 2015. This would be positive news considering that property sales in France last year were 76,580. Sales in bloc to public or private housing organisations are down but they represent less than 25% of total sales.

“These healthy figures represent an important first step in the process of recovery but it’s not sufficient and it’s difficult to talk about real trends in just one trimester,” warns Payelle.

For those who are investing in property, there is still the concern that market conditions may not be the best for trying to get a return on their investment. A more pressing concern, however, is that if the current demand trends continue this year, then there is likely to be a supply problem. The rate of new builds coming onto the market is currently at just 6.5%; mirroring the kind of problems that certain pockets of the Irish property market have been facing too as it slowly emerges from the disastrous Irish housing market crash.

Shortages aren’t likely to be as acute in a French market that is less market-led than its Irish equivalent. The FPI estimates that housing costs to the French exchequer were in the order of €40.8 billion in 2013 (down 1.2% from the previous year), while taxation income from housing was €63 billion, giving the housing department a budget surplus of €22.2 billion.

“The main challenge for the coming months will be to translate the pick-up in sales into a pick-up in new builds – something that’s far from being achieved,” estimates Payelle. His organisation points to a number of obstacles to achieving that goal: an increase in the number of appeals for new homes from private individuals and housing associations that are, they say, facing stiffer opposition from local councils, despite the fact that the application process has been simplified.

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