House prices in France to fall a further 20% by 2011 say FNAIM

A REPORT published this morning by the federation of estate agents in France, FNAIM, estimates that french property prices could fall by a further 20% by the end of 2011.

According to the study which is modelled on a number of worst case scenarios, the french housing market  will see a drop in prices of 10% in 2009. This concurs with a  Standard and Poor study released last week.

The price decline in French property accelerated sharply towards the end of 2008 with a drop of 2.9% in the third quarter.

Fourth quarter figures released today by FNAIM puts the fall in house prices in France at almost 6.5%, thought by some experts to be close to collapse.

The overall reduction in house prices in France for 2008 according to FNAIM is said to be 3.1%.

The interest rate cut in France that took the rate to below 5% at the end of last year has done nothing to reverse the downward trend.

Neither was it enough to boost domestic demand in the short term.

French estate agents, and those in the Dordogne are no exception, have reported that negotiations have become increasingly strained between buyers and sellers.

This tension is said to be caused by the reluctance of banks to ease their credit terms.

René Pallincourt, president of the FNAIM, says that "despite the interest rate falling below the 5% threshold, we fear that the banks will continue to insist on mortgage deposits of up to 20%."

As a result, FNAIM's most pessimistic forecast for the French housing market is that it should stabilise in 2012.

"An immediate decline of 10% is needed to restore household spending power and revive the housing market" says Mr Pallincourt.

He anticipates a decline of around 5% in 2010 and a further 3% in 2011.