Assetz® News - A presidential boost for France

A presidential boost for France

1st December 2008 |

Ever since he first came to power, President Nicolas Sarkozy has expressed a desire to make France a property-owning nation in the same manner as Britain. Dubbed in some quarters as the "French Margaret Thatcher" for the parallel with her expansion of home ownership through council house sales in the 1980s, the president has looked to raise the number of owner occupiers from around half to the 70 per cent seen across the channel.

In recent months, however, the situation has become distinctly complicated. For all that French banks do not engage in sub-prime lending and were not directly exposed to US banks who did, the credit crunch has still affected France. This is not least because UK buyers are fewer in number as the economic outlook darkens, while the slowdown of the wider international economy has had a knock-on effect on France.

Keen to deal with these issues, Mr Sarkozy has unveiled a number of proposals to help. One is to buy up 30,000 homes from the construction sector to help keep it going and maintain its capacity. Another is interest-free loans to homeowners to enable them to add energy-efficient items to their homes. But perhaps the most significant move is to raise the income threshold for qualification for government guarantees for mortgages. This is intended to entice twice as many people to take mortgages out.

Although Mr Sarkozy's moves might be seen as a way of stabilising the market in difficult times, the president insisted that house price inflation must at the same time be kept in check. Arguing that more buyers will be attracted to the market if prices are "attractive", the president commented: "A sector in which prices have doubled in ten years is a sector that was preparing a crisis for itself."

Some may ask how all this may affect the market for investors. The answer may depend on a number of factors. In the short term, for example, there may be little price movement. As the managing director of French property specialist firm VEF Trish Mason observed last week, prices are probably not rising or falling by any significant amount across the country as a whole. In the longer run the market may see healthy growth, which could bring good returns for wise investors.

Of course, certain niche markets may have long-term benefits, not least for those who like greener homes, should the seller to the investor be one of those who has taken advantage of the loans to add eco-friendly features.

But many investors will still find that geographical factors play more of a part than government initiatives. For instance, the romance of Paris for tourists exists irrespective of who is in power. In a feature on rental apartments in Europe, the Times noted that Paris is able to command very strong rates.

Kate Stinchcombe of online rental agency Holiday Lettings told the paper that apartment owners get 96 enquiries per year on average, adding: "There is little seasonal fluctuation in rental rates, with an average one-bedroom flat commanding between £500 and £570 a week in winter or summer." It seems that in some parts of France, the demand for lettings is as strong as ever.