Good news for french property buyers: FNAIM say it's a correction not a crash

THE National Federation of Estate Agents in France (FNAIM) realease their first quarter analysis.

The main highlights:

Despite a 1% drop in house prices in the first quarter FNAIM are not expecting them to go into widespread decline.

A slight fall in interest rates is good news for borrowers.

This period brought a market correction that is expected to continue.

Prices are stabilising.

But double digit increases in almost all provincial cities are expected.

The heady days of 2004 with prices increases of 15% are gone.

The reason FNAIM say that a crash is not on the cards is a slow and sustained decrease in prices since then. Prices fell from +15% in 2004 to +10.4% in 2005, +7.1% in 2006 and +3.8% in 2007.

The rate of increase in the french housing market currenlty is close to inflation at +2.7%.

This decrease has led to a gradual decline in speculative behaviour so that the risk of a crash is now thought to have completely dissipated.

Against a backdrop of financial crises in other markets, not limited to subprime lending, and specualtion that consumer confidence on the decline there seems good reason to expect a sharp drop in the market.

The downward trend in house prices in the first quarter of -1.9% would seem to back this up. However, the Federation insist that correction is more likely than crash.

Some of the reasons that uphold this view are that rates are now lower by 10 base points that those at the end of 2007.

There is an abundant supply of property.

Loan terms are currently favourable for borrowers.

Household solvency is up +1% over the year and spring has arrived.

In conclusion, the french property market is expected to hold steady. FNAIM appeal to vendors to take heed of the current trends and adjust their expectations accordingly.