10 years ago the price differential between a brand new
apartment and an old one was usually 25%; the latter being
the cheaper of the two. However, in the last few years
these prices have been converging at an alarming rate so
much so that now in Yvelines according to the Chambre of
Notaires of Ille de France the difference in price between
the two is now as little as tens of Euros compared with 17%
two years ago! A representative of the developers Nexity
who builds nearly 10,000 homes across France per year is
quoted as saying that the gap between the two is now around
6%.
Michel Mouillart a professor at the University of Paris-X
has studied this phenomenon very closely and commented that
if these trends continued then the price of old buildings
could soon overtake the price of new developments. He
concluded that the worrying thing about this was that the
prices in the long term will fall into balance with the
difference returning to 25% once again, stinging anyone who
has over-paid for an old apartment.
The advice given is to compare property prices in the same
area and only buy an old apartment if the price is 25%
below that of a new one in the same area. If the gap is
smaller than this then the advice is to think hard about
your purchase or negotiate.
But Will French property prices keep on rising?
French property prices over the last year until the month
of October 2005 averaged an increase of 11.4% (Source FNAIM
2005). This is in contrast to the previous year which
reached over 15% as a national average- so is the French
housing market slowing down?
Figures show that in November 2005 the price of apartments
rose by 0.3% while the price of houses by a more sturdy 1%,
averaging out at 0.5% in total for the month. This has been
the trend since January 2005 as apartments have increased
in price by a slower rate than houses and seems to be
re-adjusting to the much higher growth rates they were
accustomed to from 2002 to 2004. Data shows that between
2002 and 2004 apartments rose by between 12% and 17.8% each
year while houses by a more moderate 8.4% to 12.5% a year,
hence the readjustment seems logical. Smart investing
however is all about examining specific locations and not
looking at a country as a whole. For instance statistics
from FNAIM show that in 2005 prices in Bordeaux rose by
15%, Toulouse by 18% and Nantes by 22%- all on the west and
South West coasts of France while Paris recorded just 6%
growth in 2005 as it was the slowest mover. These price
rises in the south-West look set to continue as percentage
prices still haven't risen by nearly as much as they have
in Paris and so still have plenty of room for strong
growth. It is also interesting to note that these price
rises have often been in the less sought after areas of
cities such as Bordeaux, Lyon and Paris. "Capital" the
French investment specialists have seen that in Bordeaux,
the common areas of la Bastide prices are catching up with
those in the sought after area of the "Rive gauche". So
does this mean that you should be snapping up as much
property as you can in the less prestigious areas of French
cities? Probably not as it is quite normal that during boom
periods less sought after property can increase in value
very sharply and it is also true that they will also be the
first to drop in value if the French economy stumbles upon
hard times. The fact is that even in a slow housing market
prestigious, well located properties will always sell
whereas others may not and even though price rises now
might persuade you to buy in a cheaper area, in the long
term the price gap between the two is likely to revert back
to normal.
Therefore the advice is to choose your location and
property type wisely and find out about local property
trends before your purchase and the rewards are there for
the taking.
----------------------------------------------------
Nick Dowlatshahi is the French Property expert and Managing
Director of Leapfrog Properties. Leapfrog Properties is a
French Property Agency that specilaises in the sales of
French Property in every region of France.
http://www.leapfrog-properties.com
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