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Sunday, March 27, 2011

French House prices begin to climb again

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 After years of gentle decline and sometimes sharp falls, the French housing market appears to be picking up.

"Interest from international buyers dropped substantially at the end of 2008 but transaction numbers are rising once more," says Graham Downie.

The Fédération National de l'immobilier, the French estate agents' body, says average prices of all homes rose 6% in 2010 and property purchases exceeded 700,000 – a 15% rise on 2009.

"Prices, after having fallen quite significantly – approximately 10% if we look at the end of 2009 – have regained a certain strength," says FNAIM president René Pallincourt.

The average price of a home in Burgundy is now €148,400 (£129,000), while in Languedoc the figure is €208,800 (£182,000) rising to €384,200 (£334,000) in Provence. The federation and lenders, such as Credit Agricole, predict rises of about 3% this year, with larger increases in cities.

It is a hard slog for British purchasers. "The days when homeowners released equity from their UK properties to pay for a dream house in Provence are a distant memory," says John Busby of Athena Mortgages. He says more Britons who cannot afford to buy outright are seeking French mortgages, which require deposits of between 10% and 30%.

Borrowing in euros avoids exchange rate complications and may be cheaper to pay off if sterling eventually rallies. But Busby warns there is a possible hitch. 

"French mortgages work on the basis that the total of all [payments on] mortgages and loans held by the borrower do not exceed one-third of their income. This means monthly repayments on a UK mortgage will be taken into consideration."