French property

Analysis

The second-hand property market is still confused

market report

French property

market report

THE SECOND-HAND PROPERTY MARKET

PricesAccording to the INSEE Notary index, in the first quarter of 2014 the market for second-hand properties fell 1.7% over one year. Compared with the previous quarter, according to the seasonal corrected projections (SCP) data, stability prevails (+0.2%); apartment prices increased by 0.2% and house prices fell in the same proportions (-0.2%).

In Greater Paris, in the first quarter of 2014, the prices of second-hand apartments fell by 1.2% and those of houses by 2.3%. In one quarter, contrary to the previous quarter, apartments increased in value by 0.7%, whereas house prices fell by 0.9%.

In the provinces, prices also fell over one year, to a lesser extent than in Greater Paris, but noticeably more for houses (-1.9%) than for apartments (-1.1%). In the quarter, house prices and apartment prices were more or less stable (-0.2% and -0.1% respectively).

If we examine the trend over one year of the median prices of transactions by department, the trend remains as uncertain as in the previous quarter, with most of the changes between -5% and +5%. From one quarter to another, the trends have changed direction in many departments. In the largest provincial towns (the 14 towns with over 200 sales per quarter), seven of them saw apartment prices drop (Saint-Etienne, Lille, Nice, Rennes, Grenoble, Nantes and Toulouse), five reported

N° 24 - JULY 2014

N° 24 - JULY 2014

SECOND-HAND APARTMENTS SECOND-HAND HOUSES

Index value(seasonally adjusted)

Variation* Index value(seasonally adjusted)

Variation*

2013 Q4 2014 Q13

months 1 year 2013 Q4 2014 Q13

months 1 year

MainlandFrance 111,1 111,4 0,2% -1,2% 102,3 102,1 -0,2% -2,0%

Greater Paris 118,9 119,7 0,7% -1,2% 107,4 106,4 -0,9% -2,3%

Frenchprovinces 103,9 103,8 -0,2% -1,1% 101,2 101,1 -0,1% -1,9%

NOTARY AND INSEE (French National Statistics & Economic Studies Institute)

Focus

stable prices (Dijon, Montpellier, Marseille, Toulon and Lyon) and two rising prices (Strasbourg and Bordeaux).

The trend in house prices in the biggest conurbations in the regions (the 12 conurbations with more than 200 sales per quarter), the trend is variable, with four downturns: Béthune, Valenciennes, Nice and Douai- Lens, four cases of stability: Lyon, Rouen, Bordeaux and Lille, and as many increases: Toulon, Toulouse, Marseille-Aix-en-Provence and Nantes.

To summarize, the underlying trend that seems to be taking shape is a moderate decline in prices, with strong local contrasts, but that remains uncertain. The markets remain confused, as evidenced by the low upward or downward variations from one quarter to another.

The indicators we refer to, which regularly improve in terms of reliability, raise expectations of a slight rise between June and August. In

small small towns and conurbations, the trends should remain disparate, with no pronounced trends.

In Greater Paris, the indicators of preliminary contracts of sale seem to predict more or less stable asking prices for apartments in Paris and Hauts-de-Seine in the summer of 2014, and a slight upturn in house prices in the outlying suburbs.

In volumeAt end March 2014, the number of transactions concluded during the course of the past 12 months was estimated at 740,000 in metropolitan France, up by 12% in one year, partly due to the increase in registration fees. The upturn in sales of second-hand housing was slightly lower in Greater Paris (+9%) and benefited both the apartment and house markets. However, this is still far from the levels usually expected in Greater Paris.

For several quarters, there has been an increase in the length of ownership. This rise accelerated in the first quarter: the levels reached in the provinces (10 and a half years on average for an apartment and 12 years for a house) are the highest in over 10 years and almost 2 years longer than what they were 5 or 6 years ago.1 month

The further period to sign a preliminary contract of sale since the Alur law.

* 3-month variation: development between 2013 Q4 and 2014 Q1 * 1-year variation: development between 2013 Q1 and 2014 Q1.

French property

market reportN° 24 - JULY 2014

Under 0 % 0 % to 5 % 5 % and more

ns = not significant (the volume of sales is insufficient to calculate relevant statistics) Source: Property databases from Notaires de France (the prices for greater Paris are a valuation of the notaries’–INSEE index for the 1st quarter of 2014).

MEDIAN PRICE PER SQ M

FOR SECOND-HAND APARTMENTS IN THE 1ST QUARTER 2014

Strasbourg2 270 €

2,0 %Tours 2 210 €

6,4 %

Nîmes 1 570 €-5,5 %

Saint-Étienne 1 010 €-6,8 %

Orléans 1 930 € -0,1 %

Grenoble2 240 €-3,2 %

Clermont-Ferrand1 650 €-5,7 %Bordeaux

3 090 €12,2 %

Bayonne2 520 €-5,1 %

Montpellier2 530 €-0,6 %

Toulouse2 470€

-1,3 %

Nantes2 500 €-1,7 %

Dijon2 000 €-0,7 %

Lyon 3 290 €

0,9 %Limoges1 160 €

0,0 %

Poitiers1 500 €

0,0 %

Rennes2 270 €-3,3 %

Caen1 970 €

0,6 %

Mulhouse1 090 €-2,1 %

Besançon1 610 €-4,3 %

Marseille2 420 €-0,5 %

Nice3 460 €-3,6 %

La Réunion 2 030€

-11,2 %

Toulon 2 190 €-0,2 %

Corse-du-Sud2 900 €-2,4 %

Haute-Corse 2 310 €

6,4 %

Reims1930 €-1,2 %

Nancy1 920 €

3,8 %

Metz1 800 €

8,3 %

La GuyaneLa GuadeloupeLa Martinique

NS

Amiens2 150 €-2,8 %

Paris 8 160 € -1,6 %

Lille2 910 €-5,3 %

Rouen 2 090 € -8,6 %

(Analysis)

THE NEW HOUSING MARKET

According to the database Sit@dei2 (extract from CGDD1 memorandum no. 528 of June 2014), «The number of authorized dwellings, in SCP smoothed data, fell by 2.2% over the last 3 months compared with the previous 3 months. That of housing starts fell by 2.7% over the last 3 months.» The number of permits issued during the course of the last 12 months (from June 2013 to May 2014) decreased by 20.7% over 1 year, and that of construction start-ups by 8.5%, to 312,066 units. Individual houses were down by 13.7%.

According to the ECLN survey of the CGDD (extracts from the memorandum no. 521, May 2014) on property development market, «In the first quarter 2014, sales of new dwellings fell by 5% compared with the first quarter of 2013. The decline was lower in collective dwellings (-1.7%), but noticeable in individual houses (-30.8%). In order to contain the high inventories against this backdrop of low sales, the number of dwellings put up for sale has sharply declined (-31.5%). For instance, the level of outstandings

for dwellings put up for sale at the end of the quarter fell slightly compared with last year (-0.9%), to 101,300 dwellings.».

According to the Housing Credit Observatory CSA of May 2014, « mortgage rates have never been as lowsince the end of the 1940s ».

As far as the market for individual dwellingsis concerned in general, according to Markémétron2 (extract from the memorandum of March 2014), «Over the last 12 months, gross sales of individual houses in general amounted to about 110,200 units and fell by roughly 9% compared with the previous 12 months. Over the 1st quarter of the year, the number of sales rose by about +8% compared with the first quarter of 2013.»

Credit

According to the Banque de France data, the

output of new housing loans rose by 2.8% between the first quarter of 2013 and the first quarter of 2014. On an annual sliding scale, the rise totalled 41.5%. Interest rates are dropping. According to the Housing Credit Observatory/CSA of May 2014, «mortgage rates have never been as low since the end of the 1940s».

1-year trend : 1 January 2014 to 31 March 2014 / 1 January 2013 to 1 March 2013

1 Commissariat Général au Développement Durable.2 Indicator of sales of non-project houses produced by Caron Marketing.

Annual change inprices per sqm

French property

market report N° 24 - JULY 2014

MEDIAN ASKING PRICE FOR SECOND-HAND HOUSES IN THE 1ST QUARTER OF 2014

Outlook: is confidence returning?The second-hand property market starting to recover?

For several quarters now, the papers have been talking of a «property bubble», «coming price collapse», «a freeze», «beware of the rise in rates», «wait-and-see policy in the market», or even «deflation»... Renewed momentum in terms of volume has nonetheless been noted in recent months and could continue up to the end of 2014. Housing is a basic need. Densification is certainly helping to maintain prices. Demand is encouraged to concentrate more and more in major towns and cities in the name of sustainable development. The increase in conservation areas and new regulations for wetlands promote densification in this way. On the other hand, the trend in prices and volumes in brain drain sectors are seeing a significant decline.

The new housing market in the doldrums.

The volume of sales is collapsing because prices cannot be lowered, at least in the short term, notably in view of the rise in building costs, and demand from investors remains low.

Unlike the second-hand market, the new-build market benefited from attractive measures, which have been cut back year after year. Moreover this sector suffers from a surfeit of regulations. When the building industry does badly... For a private investor, all this curbs or even cancels his motivation, quite often driven by the prospect of yield. A large number of first-time buyers are now excluded by the price levels practised once they lost access to the 0-rate loans. Yet lowering the rates is not enough to offset this loss of solvency.Will the government’s latest announcements on this subject relaunch the new-build property market?

What is the impact of the Alur law on the market?

This is a positive law on town and country planning, yet it considerably increases the work in drawing up provisional sales contracts and revives the controversial aims of the 1989 law on rental ratios. Above all, might rent control not lead to a counter-productive effect? Must we wait for the consequences of this law before bringing real estate professionals together around a table?

Let’s try to remain confident. Second-hand property is holding up. New property actors are in the process of rebuilding a more serene future. The time for observation and listening should end, the implementation of real action measures is required. The solutions exist! In practice, our fellow citizens demand stability in tax legislation and regulations governing property rights to restore a climate of confidence.

1-year trend:1 January 2014 to 31 March 2014 / 1 January 2013 to 1 March 2013. The statistics for houses concern the whole urban area (town centre + suburbs)

Under 0 % 0 % to 5 % 5 % and more

ns = not significant (the volume of sales is insufficient to calculate relevant statistics) Source: Property databases from Notaires de France (the prices for greater Paris are a valuation of the notaries’–INSEE index for the 1st quarter of 2014).

Amiens150 000 €

0,3 %Rouen164 984 €

-0,6 %Reims

195 250 €-7,0 %

Lille175 000 €

0,0 %

Brest 158 000 €

-4,7 %

Nantes251 000 €

6,8 %

Poitiers155 000 €

1,3 %

Nîmes202 500 €

12,3 %Bordeaux250 000 €

0,0 %

Angers195 000 €

2,6 %

Montauban155 000 €

3,3 %

Toulouse262 388 €

2,9 %Montpellier300 000 €

4,5 %

Marseille / Aix-en-Provence

311 250 €5,5 %

Orléans191 885 €

0,5 %

Toulon341 150 €

1,8 %

Tours 195 000 €

-1,8 %

Chartres 180 000 €

-10,0 %

Lyon301 500 €

-1,0 %

Le Havre165 000 €

-0,6 %

Grenoble305 740 €

-0,4 %

Saint-Étienne177 000 €

-2,7 %

Metz183 450 €

5,3 %

Nancy179 100 €

-1,6 %Troyes

130 000 €-8,5 %

La GuyaneLa Guadeloupe

La MartiniqueNS

La Réunion185 000 €

4,8 %

Châteauroux114 000 €

-11,5 %

Île-de-France294 400 €

-2,3 %

Caen191 250 €

-2,9 %

Dijon205 000 €

-6,8 %

Limoges136 000 €

-6,2 %

Haute-CorseNS

Corse-du-SudNS

Stability in tax legislation and in regulations governing property rights would foster a climate of confidence.

Annual trend in theasking price

A review of French coastal areas to try and analyse price trends in this special sector shows some important disparities depending on the regions. This is actually a diverse market, composed for a very large part, for certain towns, of second homes, and for other less tourist towns, of a more traditional market of main homes.

In the main French tourist regions, with a reputation going beyond the national scope, the median price per sqm in a good many towns is often higher than 4,000 Euros, even exceeding 5,000 Euros in Bandol or Le Lavandou. While the resorts of the French Riviera still top ranking, the well-known towns of the Atlantic coast are also concerned: Biarritz (4,459 Euros), Arcachon (4,883 Euros), Trouville (4,074 Euros) or Le Touquet-Paris-Plage (4,114 Euros), are some examples that confirm a high price level and often much higher than that of more important towns and cities that are further from the sea.

Other towns with a more diversified property offer, show an median price ranging between 3,000 and 4,000 Euros. That is the case, for example, for Nice (3,564 Euros), Vallauris (3,539 Euros), Palavas-les-Flots (3,886 Euros) or La Rochelle (3,471 Euros).

Finally, certain coastal towns with no noticeable tourist calling (industrial towns, ports) show noticeably lower median price levels per sqm: 10 towns remain below the threshold of 2,000 Euros per sqm. Dunkerque shows a median price per sqm of 1,650 Euros, Saint-Nazaire is at 1,789 Euros and Narbonne at 1,803 Euros. The clientèle of these more regional towns is looking above all for a main home and the «second home» effect has no impact.

TrendAs in the rest of France, the downturn in prices is noticeable on the coast: we see a drop in median prices over 1 year in nearly three quarters of the towns analysed. Towns have

lost ground, posting up to -14% (Saint-Brieuc), but many are concerned by a more controlled decline, between -2 and -5% (Cagnes-sur-Mer, Gruissan, Pornichet, Sète). However, certain resorts have maintained a strong momentum (Capbreton with +17.2% or Trouville-sur-Mer with +13.3%).

This downward trend should, in certain cases, favour the return of local actors onto the markets, from which they had been excluded because of the sharp rise in prices.

In general, we see that the price trend in the last 10 years remains positive, which is not necessarily the case at 5 years for a certain number of towns, like La Baule, for example, where the 10-year trend is 30% up, but 14.7% down at 5 years, or Saint-Raphaël, where the 10-year trend is 40.1% up, but 5% down at 5 years

French property

market reportN° 24 -JULY 2014

Find all the French property reports at www.notaires.frContact : Andrée Sénès, Business Development Manager – Training and Development Department - Conseil supérieur du notariat. Editorial committee: Bruno Delabre, Philippe Laborde, Vincent Chauveau, Andrée Sénès and Claude Taffin, Scientific director of DINAMIC. Published by: Conseil supérieur du notariat - 60 bd de La Tour-Maubourg -75007 Paris - Tel. +33 (0)1.44.90.30.00 - www.notaires.fr - Design and creation: Bureau de Création - ISSN: 2100-241X. Page layout: Alexis Fressard - Communication consultant

Seasonally corrected prices(SCP)

In the same way that the calculation of the indexes makes it possible to strip out structural effects, the seasonal corrections are intended to correct seasonal fluctuations. The purpose is to ensure a fair comparison of trends between two consecutive quarters, without this interpretation being distorted by the time of year. For example, each year the property prices rise during the third quarter (particularly those of houses) due to the demand from families driven by the school year.

Median prices

The INSEE Notary indexes are only available in those geographical regions in which the number of transactions is sufficiently high. At more detailed levels, median prices are used. The median price is the price at which 50% of transactions have been concluded at a lower price and the same amount at a higher price. It represents the «midpoint» of the market, in a better way than the average as it is less affected by extreme values.

INSEE NOTARY INDEXES

The calculation method used for the INSEE Notary indexes is based on econometric models which break down the price of a property according to its main characteristics (location, size, comfort, etc.) in order to be better able to withstand structural effects that cause transaction prices to vary from quarter to quarter.

Property prices in French coastal towns

Définitions

Rocquebrune-Cap-Martin

5440 € / 2,1 %

Antibes3960 € / -6,9 %

Menton4700 € / 2,4 %

Hyères3370 € / -4,3 %

Toulon2130 € / -0,8 %

La Seyne-sur-Mer

2790 € / -4,5 %

Six-fours-les-Plages

3930 € / -3,9 %

Sanary-sur-Mer4260 € / -1,6 %

Bandol5080 € / -5,1 %

La Ciotat3250 € / -5,0 %

Le Grau-du-roi3910 € / 3,7 %

La Grande-Motte

3670 € / -2,5 %

Sète2270 € / -4,3 %

Agde3000 € / -0,2 %

Narbonne1800 € / 0,2 %

Gruissan2690 € / -4,1 %

Leucate2500 € / -1,4 %

Canet-en-Roussillon

2740 € / 0,9 %Saint-Cyprien

2890 € / -4,1 %

4000 € and more

3000 € to 4000 €

2500 € to 3000 €

2000 € to 2500 €

Under 2000 €

Le-Touquet-Paris-Plage

4110 € / -5,5 %

Le Havre1830 € / -5,1 %

Villers-sur-Mer2820 € / -3,1 %

Cabourg3080 € / -2,7 %

Saint-Malo2760 € / 8,2 %

Saint-Brieuc1110 € / 5,9 %

Lorient1570 € / -1,2 % La Baule

-Escoublac4400 € / 0,4 %

Les Sables-d’Olonne

3430 € / -1,5 %La Rochelle

3470 € / -5,1 %

Royan2760 € / -5,2 %

Arcachon4880 € / 7,4 %

Anglet3090 € / -7,8 %

MEDIAN PRICE PER SQM FOR SECOND-HAND APARTMENTS

1-year trend of the median priceper sqm