Assetz® News - France 'avoiding the credit crunch'

France 'avoiding the credit crunch'

26th September 2008 |

France has managed to avoid the worst of the credit crunch because its borrowing system and property market is run on very different lines to those of many other countries, an expert has said.

Banker Francois Artignan told the BBC the French have a very different approach to the British when it comes to credit, something that could stand them - and the French property market - in very good stead.

Comparing the two countries, he commented: "It's true that you can note a big difference in consuming behaviours between the French and the English.

"People here don't believe you can just put your debts together and get them refinanced... But in London ... it was as if wealth was something you could get from a bank, it's a sort of miracle people seem to believe in England."

While some may consider this assessment an exaggeration, such a comment may perfectly sum up the contrast in mindset between the French and British. As the BBC report pointed out, personal debt in France is 47 per cent of gross domestic product, less than half of the UK level, while the scope for spending on credit cards is very limited. The result of this thrift appears to be that France is avoiding the credit crunch problems seen elsewhere.

Lower home ownership in France may be another consequence of this cultural and financial contrast, although President Sarkozy has been seeking to change this. But finance minister Christine Lagarde told the BBC there will still be tight borrowing controls. She stated: "Expect two conditions - a down payment of 20 per cent of the value of the house plus mortgage [repayments] which will not exceed 30 per cent of income."

In addition to this, she added, it is also worth noting that France already has a good "safety net" in its lending attitudes, particularly because of the absence of sub-prime lending, the root of the crisis.

What all this may mean is that the French economy is likely to continue relatively serenely - notwithstanding the knock-on effects of the problems its trading partners are suffering. Moreover, it also means the French property market could be a much sounder one to invest in, given that without a sudden major decline in the availability of credit, a slump of the sort seen elsewhere is less likely.

In fact, the founder and managing director of French property company VEF, Trish Mason, has said, the current market is one with the most accurate pricing for years. She stated this week: "Property prices have stabilised, where there have been silly prices put on property by new and inexperienced agents who all came out to make hay while the sun shone in the last three or four years, these prices are now correcting themselves."

She added: "By buying a property in France now you are buying a home at the right price."

So if the price is right now after a small correction and a slump through a sudden loss of slack credit is out of the question because it was never available in the first place, France may be the most reliable market around just now.