The recent High Court judgment in Euro Accessories Limited  EWHC 47 (Ch) has shed some light on the interpretation of “fair value” for a compulsory transfer initiated by a...
Will the revival of the French property market continue?
One month has passed since the first stage of removing lockdown restrictions in France began. But to what extent has activity in the French property market resumed, and what’s the outlook for the rest of 2020?
According to data produced by the French General Council for the Environment and Sustainable Development (CGEDD), the number of property transactions for existing properties in France has experienced continuous growth since February 2013, despite dips in 2014 and 2018. Existing property transactions were up 11% in 2019 and this rate of growth continued well into January 2020. In terms of prices, the average price for apartments and houses were up 5.2% and 2.6% respectively since the end of 2016.
However, the impact on the property market deepened as the gravity of the pandemic became evident. Sales of new builds in the first quarter of 2020 were down by 9,000 in comparison with the first quarter of 2019, according to the French Federation of Property Promoters (FPI).
When France entered lockdown on the 16 March 2020, the French property market ground to a halt. Property buyers and sellers who had entered transactions were unable to complete as a result of Notaires offices being closed or operating with reduced personnel. International buyers and sellers were unable to complete due to the restrictions on international travel. For those in the early stages of the process, property searches were limited to browsing online.
France loosened restrictions on 11 May and the general response has been positive. One agency I contacted in Fréjus saw four offers accepted in the first 14 days of reopening and LaForêt reported that 70% of pre-lockdown activity returned in the first week. Guy-Hoquet agency report that viewings are up in comparison with this time in 2019 and Century 21 note that their website traffic has resumed. It appears, therefore, that the French property market has hit the ground running post-lockdown.
But will this promising return of activity continue?
The finalising of transactions initiated pre-lockdown will create a sudden spike in property transaction figures. The real consideration for the property market is how long it takes for those who have been window shopping to find a property and have their offer accepted. When considering that the house-hunting season traditionally runs from April to September, it’s likely that there will be a slight downturn in the number of offers made, as those who had planned to start searching in April now find themselves looking from June onwards. How soon international buyers will be able to re-join the action remains to be seen, as this will depend on the duration and extent of international travel restrictions currently in place.
The outlook for the French property market is that new transactions will take place towards the end of 2020, but perhaps not at the pace seen in 2019. At the time of writing the consensus is that property prices are holding steady, with little movement.
In April, SeLoger reported that two thirds of property searches on their website were for houses with gardens. A trend towards working from home and a potential reduction in the need for accommodation in crowded cities will determine how prices for apartments and houses fluctuate. In the current climate, prospective buyers who are restricted financially, possibly as result of the pandemic, may decide to delay a move. The return of confidence in the market will depend on the revival of the French economy over the next few months. The delicate balance between supply and demand will therefore dictate whether the sharp rise in property prices in cities such as Bordeaux continues or falls more widely. On a positive note, financial institutions appear much more resilient than during the crisis of 2008-10 and a complete crash appears unlikely.
To some extent, prices for existing properties will be kept buoyant by the lack of new builds being put on the market as a result of the pandemic. It’s been reported that in the first trimester of 2020, the number of new builds placed on the market dropped by 14,000 in comparison to 2019 figures. If the economy continues to slow down and building work becomes more expensive with firms going into insolvency, it’s likely that this trend will continue and potential buyers will find themselves turning to existing properties.
And then there’s Brexit. This will concentrate the minds of British nationals with property in France who are thinking of selling. As things stand, the rates paid in French Capital Gains Tax by UK nationals will increase significantly when the transition period ends on 31 December 2020. With the potential of a decrease in activity and house prices in France, this may be the perfect time to put a French property on the market while interest is high. That said, as British nationals remove their French investments in order to avoid higher rates of French CGT, plenty are willing to take their place, especially those wishing to move permanently to France before the end of the transition period to obtain settled status and retain their rights under EU law. The process for buying and selling can take 3-4 months once the price and terms have been agreed, meaning that the timeframe for both parties is limited.
If you require any legal advice on French Capital Gains Tax or assistance with your French property sale or purchase, please do not hesitate to get in touch.