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French fall beats sterling drop for investors

1st September 2009 | back to article listings BACK    print this article PRINT

One of the stories of the property sector around the world has been that of falling prices, driven by a lack of sales and credit. In Britain, of course, this has been particularly notable due to the large role property plays in the wider economy and the high level of concentration on homeownership. In the US, the situation has been aggravated by the impact of a large number of foreclosures.

In France, the situation has not quite been the same, with it being well documented that the country's banks have always been more cautious lenders and had little exposure to the subprime market across the Atlantic. Moreover, home ownership is something that takes place on a smaller scale. Even so, the market has suffered from the second-hand effects of the world economic crisis as France slipped into recession and the number of overseas buyers of French property was inevitably affected, not least among hard-hit Britons.

Now France is out of recession, but some problems remain acute, notably the low value of the pound that has made buying across the channel harder for UK investors.

However, the top end of the French market has now seen such decreases in asking prices that this last factor may have more than balanced itself out, according to the Daily Mail. In a feature on the cost of chateaux in the Dordogne, the paper noted that many sellers have been dropping the requested amount by between ten and 30 per cent.

As a result, the paper noted, a property that would have cost £2 million in 2007 when the exchange rate was up at €1.50 to £1 could now be purchased for £1.8 million.

Of course, not every investor will have the funds to make grand acquisitions of country chateaux. But if the maths adds up in this case, so it may for a range of properties all the way down the price scale.

Writing in the Financial Times recently, editor of Money Week Merrin Somerset Webb related a recent encounter with Jim Mellon, author of the book The Top Ten Investments for the Next Ten Years, noting that he had remarked that the euro is "very, very overvalued" and that the policy of maintaining low inflation was under strain.

Such a suggestion could indicate that the value of the currency may come under pressure both from a change in policy such as a possible Europe-wide stimulus package, or from a stronger pound as Britain's greater individual national freedom to set rates makes a larger economic difference, something Mr Webb noted was a point stated in Mr Mellon's book.

That, of course, could mean the prospect for the coming months is that things will get better for UK buyers, perhaps with a boost to sterling's value when Britain's gross domestic product figures show an end of recession here, something that may happen by the end of this month. In the meantime, investors may go on looking hard for the discounts that could mean they save money anyway.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/4969.html. Alternatively, please see our full press release archive.

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