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According to the website seloger.com which advertises flats sold by estate agents, the average asking price in Paris has declined by 3.2% year on year to 9.216 Euros / m2 at the end of August. Obviously, the asking price stands above the final acquisition price after negotiation. At the end of the second quarter 2013, the average price calculated by the “notaires” (at the signature of the acquisition contract, therefore after negotiation) was down by 1.2% at 8.240 Euros. Notaires are about to issue an updated figure for the second quarter within a few days. As the notaires figure is calculated from the final acquisition contract (“acte de vente”), it reflects negotiated price 3 to 4 months earlier due to the acquisition process timeline in France.
Another interesting source to analyse, comes from the “meilleursagents.com” monthly barometer. Contrary to the notaires data, this barometer is calculated from the preliminary acquisition contract* (“compromise de vente”) therefore it anticipates the notaires figure approximately 3-4 months in advance (average time lag between the “compromis” and “acte de vente”).
The main points of the August 2013 barometer:
- In Paris, the small flats recorded a slight price increase (+1.3%) while bigger flats recorded a significant decrease (-2.2%), leading to an overall notch down by -0.1% over July and August.
- In the suburb, average price decreased almost everywhere: -0.3% within the first circle around Paris (“petite couronne”), and -1.2% in the more distant second circle (“grande couronne”)
- The “volume de transaction” (number of acquisitions), was particularly low this summer as the market was focused on good quality properties, which artificially sustained the average price. Indeed, many owners of average or poor quality properties have withdrawn from the market, as they still not completely accept a market value decline. Therefore the average market price is likely to decrease, once the effect of the “quality factor” withers away.
- The number of “small flats” available on the market was particularly scarce this summer as landlords (mostly investors) were waiting for the capital gains tax reform from the 1st of September (refer to our previous posts“capital gains tax on French property, latest updates“, and “capital gains tax on French property latest updates (part 2)” and “French property capital gains tax: calculator for the September 2013 reform”). This probably explains the “technical increase” in Paris which may quickly melt down and reverse as more properties should be on sales from September onward.
Additionally, since July the interests rates have started to increase slightly, after bottoming down in Spring. According to “empruntis.com” the 20 years mortgage reached 3.5% at the end of August, versus 3.35% in Spring. This changing trend is related to the rise of the 10 years “OAT” (French state bond) from less than 2% to 2.5% in August, it could continue upward in the following months. The impact of +1% interest rates increase is estimated at -8% of purchasing power for the buyer. This might put a little bit more pressure on the market price.