Sales Down, Interest Rates Down, Euro Failing…Good News for Investors!

The press is saying that even though mortgage rates are as low as 2.1%, only one in four properties in Paris are being sold because buyers are demanding lower prices that the sellers refuse to agree upon. Sales are down as has been predicted, thanks to a stalled economy, joblessness and record-high property prices.

Interest rates are at an all time low, having fallen .8% from a year ago, but new mortgages fell 27% from a year earlier. New home sales fell 18% in 2012 and existing home sales fell 12% and falling further in 2013. President François Hollande’s increase in property taxes, wealth tax, income tax, inheritance tax and capital gains taxes may have been added to cut the country’s deficit, but it’s played havoc with the property market as the wealthiest are leaving the country putting their big properties on the market at prices high enough to cover the increased capital gains tax, yet with no buyers on the horizon.

Banks and real estate professionals are trying to ‘sweeten the pie’ by reducing borrowing rates and sales commissions, but the market is halted by all the back-end expenses in place by the socialist government. Banks claim that demands for housing loans has dropped considerably and they have to be particularly cautious offering loans because of unemployment and the start of a price decline.

On another note, this week a senior German government advisor predicted that the euro “may only last five years,” and has a “limited chance of sur
vival.” It’s a rather pessimistic point of view considering the German government is doing all in it’s power to hold the euro together for the sake of unity in Europe. He warned that: “No country can pile up debt without running the risk that their investors will pull the plug. It’s in each country’s interests to keep their own debts as small as possible. Where the limit lies has to be individually decided. That depends among other things on economic growth and the growth of population.”

From our perspective, should the euro ‘tank’ — foreign investors will see this as an opportunity to get in the market at a low, making property in France particularly desirable. For those who own and rent to tourists, tourism by Americans and other nationalities carrying stronger currencies will be on the rise bringing more revenues to their investment properties.

Those who have properties to sell are struggling with the current market, but potential buyers may see this as an opportunity to get in on the ground level. The investment clients we have continue to be those who have a strong desire to have a foothold in France, simply because of French lifestyle and culture; those who have cash in accounts earning little that can be better invested in property for long term gain; those who wish to diversify their investments and ‘hedge their bets’ against the prosperity or failing of two currencies and those who need to find a great place to legally put their cash in a real asset rather than an offshore account, now so seriously under scrutiny by their governments.

With interest rates this low, investment in property in France can be very lucrative, as long as you’re willing to go the long term and not look for a quick turn of profits.

A bientôt,

Adrian Leeds

Editor, French Property Insider & Director of The Adrian Leeds Group, LLC

(Photo by Linda Hervieux)

Email:  [email protected]

P.S. Fans of House Hunters International — be sure to mark May 16th on your calendars and plan to watch the newest episode “La Vie en Paris, France“! After transferring to Paris for her dream job five years ago, Abby Gordon was ready to purchase an apartment to call her own. We helped her navigate the Paris property market to balance her idea of perfection and her budget. Tune in May 16th for all the action!

P.P.S The Adrian Leeds Group, LLC are property consultants designed to assist you in making the best investment you can make anywhere in France. If you cannot attend the Living and Investing in France Conference this coming September, or wish to pursue your dream sooner, contact us to learn how we can help by emailing us at [email protected].