French property prices to remain soft

Back in May 2012 and at the election of Francois Hollande, they were only 36% of French people who worried about their future disposable income. That number rose to 46% in August and now stands at 53%. This dramatic increase explains why Francois Hollande has now faced with a sharp drop in the opinion polls. This trend has been accentuated by the economic climate which has lowered household income. According to a survey conducted by Viavoice, 37% people are now worried about the new tax proposals (+6%) and 25% about the gas price (+6%). These fears are related to the recent government announcement of a plan to raise an extra €20 billion in tax revenue in 2013 and an increase of 2% of the gas price from October 1st.

Meanwhile, consumer confidence about their financial situation fell by 2 points in September compared to July, according to the latest INSEE indicator. Pessimism is the catchword: the balance of people who anticipate a decline in their future purchasing power jumped by 11 points in the past two months. The French are now more likely to save money (+7 points) rather than making major purchase (-3 points). Real estate prices are also affected by the situation as only 3% of the French people plan to buy a property in the coming months versus 4% which is equivalent to a drop of 25%. In addition to a hardening in the criteria related to obtaining a French mortgage, the current economic situation will lead to a softening of the property prices and to an increase in the bargaining power of the would-be buyers.