Saturday, 4 May 2013

Saturday, 4 May 2013

French property prices about to rise ?

Since 2007, property prices in rural France have drifted slowly downwards. Fuelled at the start of the Millenium by British buyers, prices had increased significantly helped the expansion of low cost airlines and refurbished French regional airports.

When the Global financial crisis struck, it hit hard. Sterling fell from around 1.50 €, to below 1.10 and near parity, causing significant problems to British ex-Pats who had moved to France during this golden period, and often on fixed incomes (pensions). Their standard of living was litterally slashed by 35%.

Inevitably, property was seen as overvalued, and the number of sellers started to exceed the number of active buyers. In that sort of market, only one thing happens. People started to look for safe havens, tradionally bank deposits and gold.

But the last few months has seen a shift of sentiment in all of these areas, and markets are driven by sentiment.

Today, investors are nervous about holding too much cash in the bank. the returns are almost non-existent, Greece has been a wake up call to what could happen. More sphisticated investors turned to Gold, and prices rocketed to record levels.

Gold prices today are around $1,560 an ounce, their lowest level in about a year and down about 13% from highs around $1,800 an ounce last autumn. Add to this that it looks like we’ve only seen the beginning of the gold price declines.

Investment funds have been heavily into gold, and now they are impacting upon prices via what is known as "cascading risk". This is because when a pure gold fund suffers a redemption, it has to sell gold. That results in the fund dropping further, since the underlying asset is increasingly out of favour. This in turn results in more redemptions etc. starting a vicious cycle of negativity that can be hard to break.

Turning to property, since the UK Government launched its Help to Buy programme (unveiled in its March budget) and the Funding for Lending scheme (launched last summer and expanded last week) there has been a marked increase in property sales across England and Wales.  Property prices in the capital rose by 0.7% in April (the highest monthly growth seen in recent years).Homes in London were typically on the market for 4.6 weeks in April (less than half the average time expected prior to the Banking Crisis). Sellers achieved more than 95 percent of their asking price. (levels not seen since 2007). Completed sales rose by 5% last year to 932,000, according to HM Revenue and Customs, (the highest level of sales since the Banking Crisis).

Confidence is returning to property. Confidence is falling in other "safe" assets such as gold and cash. This is good news for the property market, not just the UK but globally. As UK vendors find the market moving again, many will advance their dream of owning a house in France. With Sterling improved at around 1.19 €, French prices low, now is a good time to be buying. There are some real bargains out there!

Peter Elias (Agent Commercial) www.allez-francais.com
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