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This week, the French “notaires” disclosed their property report for the second quarter of 2013. Average prices over the French property market slightly increased by 0.2%* compared to the 1st quarter, this is based on final acquisition contracts (“acte de vente”) signed between April and June*. Houses prices improved further than the average (+0.5%), while flats selling price remained rather subdued recording a 0.2% rise. However, the trend still stay on the downside compared to Q2 2012 (-1.1%). Additionally the number of transactions stayed at a very sluggish level despite a slight recovery in Q2 ( 677 000 over a year as at the end of June, +2.9% compared to the 12 months period at the end of March at 663 000, however it reached 709 000 at the end of December 2012 and 858 000 in 2011). Please read our post “Paris property price to decrease slightly up to October, further trend not yet clear”, which also reports about property market in and around Paris.
The weak price recovery was mainly triggered by transactions in “province” (outside of Paris and its suburb), where prices increased by 0.6% in the 2nd quarter (+0.7% for houses and +0.4% for flats), after 2 years of dwindling prices. Consequently, prices still remain below the previous year level (-1.1%).
“There is no collapse of the market, but we don’t have a clear feeling that it has started again” said Christian Benasse the President of the “Chambre de Notaires de Paris” (Paris notaires official body). “the property market shares several trends with the rest of the economy which are sometimes contradictory and often difficult to interpret”. The overall picture is that the transaction level remains weak while the prices stay firm.
Another interesting indicator has recently been issued by “www.pap.fr”, the specialist website for direct transactions between private owners without the intermediary of an estate agent. As of the 1st of September, the “pap index”** has increased by 0.85% for the flats and 1.04% for the houses over the past 3 months. Despite being a rather modest increase, this trend contradicts the overall feeling that the property market has recently been on a negative slope. Since the beginning of the year flats are up by 0.66% while houses are down by -0.62%. This seems to be contradictory with the data revealed by the estate agents early July showing a price decrease around 3%. However, the “pap index” covers a smaller number of transactions and over a limited geographical scope**. Another interesting data is the negotiation rate (the percentage recording the difference between the advertised price on the website and the final agreed price) which stands at 4.52% for flats and 5.01% for houses. The time lag between the day the property is advertised on the website and the withdrawal is 8 weeks for the flats and 11 weeks for houses (which includes the 7 days of withdrawal from the buyer, once the “compromis de vente” has been signed off).
Is there a first impact of the capital gains reform?
The recent reform of the capital gains tax in place since the 1st of September (however still to be backed by the Parliament) should bring more property on sales to the property market, especially with the temporary additional 25% rebate, due to last until the 31st of August 2014 (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”). However, for the moment the notaires have not recorded any noticeable impact on the number of preliminary contracts. Although the reform decreases very significantly the capital gains tax for property hold for more than 6 years, it is rather complicated and it will take some time for people to realise that it could be a real incentive for making their mind to sell, after the “freeze” following the sharp increase of the tax in 2011. However, a slightly negative factor may hinder partly the market, this is the potential increase of stamp duty from the first of January 2014 which will rise the property cost by 0.70%. Another factor to take into account is the slight increase of interest rates on mortgage.
*As a reminder, the notaires data derived from the final acquisition contract (“acte de vente”)which is signed on average 3 months after the preliminary contract or “compromise de vente”. Therefore this moderate trend reflects negotiation finalised during the 1st quarter 2013. The notaire database is very exhaustive as it records all property transactions in France. The data are the most reliable, but it is good to remember that they represent the negotiations of the 1st quarter, you have to take that into account when comparing with data disclosed by estate agents networks, which are related to the “compromis de vente” and therefore will appear in the notaires statistics several months later. Additionally the agent networks tend to disclose their data quicker, however they only give a partial view of the market trend. All prices data stated in this article are for “old properties” (i.e. not newly built properties)
**The pap index is calculated on a monthly basis based on transactions recorded by pap over the 8 biggest conurbations in France (Paris and its suburb, Marseille-Aix en Provence, Lyon, Lille, Nice, Toulouse, Bordeaux, Nantes) representing a population of 16.293.000. The 1st of September index recorded the price trend over 10.776 transactions over the above area during August 2013. The price is of course the actual final price agreed by the buyer and the seller, and not the price advertised on the website.
You can access the pap index: