New forecasts for French property prices

ANALYSTS have readjusted their forecasts downwards for house prices in France for 2008.

Empruntis, the insurance brokers, originally predicted a drop of three percent for the year. This is now more likely to be four percent.

Prices are expected to fall by between four and six percent in 2009. A drop of around 10% is expected between now and the end of 2010.

There are two main reasons for the revision of their forecasts.

Firstly, a rise in interest rates, now at four percent in the Eurozone and, secondly, the price of oil. Of course, the latter is an unknown in that it isn't certain where the price of a barrel of oil will stabilise.

This could mean a further negative impact, not yet forecasted, on house prices.

On a positive note, with no sign of interest rates coming down, French banks are likely to introduce new lending products to help offset the expected fall in demand for mortgages to attract new customers.

The foundations of the French property market are stronger that most of its European neighbours thanks to the fact that creditworthiness has always been tightly controlled.

Payment defaults are rare and demand remains strong.

These could help contain price decline in french property to reasonalbe levels. "The French housing market could lose 10% by 2010" explains Geoffroy Bragadir.

But even at this level, the decline would represent more of a correction than a crash, after a price spike of over 140% in the last 10 years.

source: capital.fr