New-housing demand slows in France, but confidence remains high

After six months of strong rebounds, the improving demand for new homes has suffered a setback in the third quarter with developers reporting a slight decline, according to a quarterly survey released Tuesday by Insee.

New home starts dropped a little by 0.7% to 75,900, according to figures released Wednesday by the Ministry of Housing. However developers are reporting a decline in their stock of unsold homes, which is a positive yardstick for the market.

Building permits for new housing are in the green for the second consecutive month, with an increase of 2.3% to 98,700, almost identical to that posted in late August. With the number of building permits beginning to increase, there is a positive outlook for housing starts next year and this will hopefully continue the gradual recovery of the market.

In the first half of 2015 sales of new homes rose 19% year on year (+16% for individual new-build homes), says a study by Credit Agricole. Sales of existing properties also increased (+ 10% in the first eight months of the year). Prices have dropped around 2% year on year, which continues to affect the fluidity of the market.

Even with French mortgage rates holding their ground at 2.70% fixed for 20 years for the average, real estate remains affected by negative economic factors, such as low growth, high unemployment, the impact of fiscal measures. Yet despite these overarching negative sentiments, properties in key prime and touristic areas of France will remain the country’s best performers.