Bad News, Good News, Buying or Selling at Any Age, but Not in the Summer

MAJOR FRENCH LENDER TO AMERICANS SET TO SHUT DOWN

The bad news is that Americans’ best lender in France, Crédit Foncier, part of the BPCE Group, the second largest banking group in France, announced its “integration” into the Group (or closing, in reality) this past week. This decision will have significant impact on the real estate market in France, particularly for Americans who have been shunned by other lenders thanks to FATCA, the U.S. Foreign Account Tax Compliance Act, which was passed as part of the HIRE Act. It requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding payments.

Low interest rates, hugely advantageous to the borrower and to the economic success of the real estate market, hindered the profitability of Crédit Foncier, resulting in the decision to shut down their operations, during a transitional period so that clients and partners would continue as normal…at least for a while. I suspect we’ll have till the end of the year to profit ourselves.

We therefore urge you to consider stepping up your plans to finance a purchase of property in France at rates under two per cent before we Americans are left with no borrowing options at all! Contact us for more information.

PARIS REAL ESTATE HOTTER THAN EVER

The good news is that according to the latest data from Paris-Ile-de-France Notaries, in the spring of 2018, the property market in Île-de-France showed a good performance in the property sector in Paris and more level price increases between apartments and houses.
 
The activity is still very dynamic, but it is no longer at the same high level as it was in 2017, however, the Paris region, is showing good resilience. There is stabilization of the prices of apartments and houses of sales in progress, with the exception of the Capital, where prices continue to rise.

In Ile-de-France over one year, from April 2017 to April 2018, the price of resale homes increased overall by 4.6%. The price of apartments in the Paris Region increased by + 5.4% (to 4,550€/m² in Petite Couronne and 2,950€/m² in Grande Couronne). As for houses, prices are up 3% annually (with a house price of 356,100€s in the Petite Couronne, and 280,200€ in the Grande Couronne at the end of April 2018).
 
In one year, apartment prices are expected to rise 1.4% in the Petite Couronne and 1% in the Grande Couronne. In the suburbs, prices of resale homes would be up 3.6% in one year. At the end of August 2018, the price of houses is expected at 315,900€ (compared to 302,700€ in April) and 5880€/m² for apartments (compared to 5.780€/m² in April).  

In Paris, the price per square meter of resale apartments reached 9,160€ in April 2018 (+1.1% in 3 months and +7.5% in one year). Parisian prices oscillate between 12,000€ in the 1st and 6th arrondissements and 7,550€ in the 19th. According to the data from the preliminary contracts, the price per square meter should reach the new record of 9,360 € per square meter in August 2018 (+1.5% in 3 months). In the Capital, the annual rise in prices would thus be reduced to 5.2% from August 2017 to August 2018. It would therefore continue at a reduced pace.

BUYING OR SELLING YOUR HOME: IT’S AGE THAT COUNTS
 

According to a study of Parisian notaries, age does make a difference. Quite naturally, during an active life in earlier years is the phase where one becomes an owner, whereas the retirement period is when one sells.

In 2017, of the 170,000 old homes were bought in the Ile-de-France by individuals, more than 29,000 (or 17% of the total) had a purchaser* aged 20 to 29 years-old. The number of buyers then remained very high in the 30 to 39 age group (60,700 transactions, i.e. 36% of housing sold), then gradually decreased. In the Ile-de-France, nearly every second home was purchased by a purchaser under 39 (median age). However, the over 60 year-olds still accounted for 10% of the buyers.
 
Sellers are very well represented at two periods of their life: between 35 and 40 years of age, probably the age of a first resale, when it is necessary to find more room with the arrival of children in the family unit or the opposite, during a separation where one is forced to resell a property acquired by both. At the same time, buyers are numerous at the same age, which suggests that one sells only to buy again.
 
A second peak of sales is observed between 60 and 65 years at the time of retirement. Older households probably leave the Ile-de-France region. Another explanation could be that their properties are sold to raise capital in order to face a decline of income during retirement. Contrary to what one might think, we have not observed a peak of sales around the average age of entry into retirement homes (85 years).
 
The median age of sellers in the Paris region is 55, around the middle age. However, apartment sales are earlier, with homes being sold later (higher peak around age 65). Overall, the sellers of resale housing in the Ile-de-France have become more numerous than buyers at 51 years-old and higher.
 
* In the case of a multiple purchase, the selected purchaser is the oldest.

NOTE RE GRAPHIC: According to data from the BIEN database of Paris-Ile-de-France notaries, we quantified for each age the number of buyers (blue curve on the graph) and sellers (green curve) to highlight the the most common behaviors at each stage of life.

SUMMER: TO BUY OR NOT TO BUY, THAT IS THE QUESTION

As of the 14th of July, France pretty much shuts down for summer vacation. This means that the agencies, the Notaires and the sellers will be largely unavailable and properties on the market minimal. This could be the best of times or the worst of times…the best of times, because what is on the market may be at a bargain price (because the sellers are desperate to sell!) and worst of times because inventory is limited and getting anything accomplished a real challenge.

If you are planning a property purchase, don’t expect your summer vacation in France to be lucrative! Enjoy your stay, but get serious in the Fall! We’ll be ready when you are.

A bientôt,

Adrian Leeds
Adrian Leeds Group

Respond to Adrian

P.S. There will be no French Property Insider Thursday, August 2, when I am on vacation myself!