French house prices accelerating faster than incomes

The price of French property is thought to be overvalued in many areas of France, when looking at the average increases to household income. A recent study goes into some detail about the extent of the phenomenon and how the gap between housing prices and household income has increased between 2000 and 2010.

People saying that property prices are overvalued in France is not a new phenomenon and the detail revealed by the report on the capital.fr website has  accurately determined the growth recorded over the last full decade  by the FNAIM (federation of French estate agents) and compared it to average taxable household income figures from General Directorate of Public Finance.

 

In 10 major French cities we are seeing a startling increase to house prices with no corresponding increase to household income. The study paints a pretty damning picture with the real estate market appearing significantly overvalued in cities such as Strasbourg (+65% between 2000 and 2010 with an average income increasing by 10%), Clermont-Ferrand (80% for price and 17 % of income) or Nantes (99% and 23%).

However, these figures appear meager compared with other cities which followed. During the last decade, property prices grew even more disproportionately in Toulouse (119% with an average price from 1156 euros per square meter in 2000 to 2532 euros in 2010) and in Paris where the average price per square meter increased from 3167 euros to 7208 euros (128%, while the average taxable income only increased at the same time only 13%).

Marseille and Lyon also show relatively similar increases (prices up 130% and income evolving respectively 22% and 18%).

The winner was Toulon where the price of housing has soared by 164% in ten years (983 euros per square meter in 2000 against 2591 euros in 2010).

By not taking into account the historically low level of mortgage interest rates or the different tax devices in favor of homeownership such as the PTZ Plus, the new tax exemption law, etc.., the study certainly appears incomplete but nevertheless it does show a market property largely disconnected from reality, a trend which we see across many European countries.