We have previously reported on here that France as theoretically the most overvalued house prices in Europe. Also because it has not yet had a property crash the liquidity of its banks is dramatically overestimated – in reality France is as much in the Merd as Italy.
From Marianne 2
With rising house prices of 8.7%, France is the third most overvalued market in the world. Beware of the crash, warns Laurent Pinsolle – deploring the tax breaks that have fueled the housing bubble.
Although prices continued to rise in Paris , the property market begins to show signs of reversal in France. The question is: is there a risk of a crash , as we experienced from 1991 to 1998?
France, European champion of the housing bubble
The Economist has indeed released its quarterly index of house prices, which showed that France displays the third highest increase with a rise in prices of 8.7%, behind only Hong Kong and Singapore. The price increase has slowed considerably in China, 3.9%, as a result of numerous measures taken by the Beijing authorities . Many European markets (UK, Italy and Spain) are on the downside.
But the most worrying indicator is the assessment of prices relative to rents. It follows from this index that France is the third most overvalued market in the world behind Hong Kong and Australia. The prices are well above the 48% ratio of long-term rents. The Chinese market would be overvalued by 14%, Spain and Great Britain of 39 and 28% again, the United States have reached a certain equilibrium after a price decline of more than 30%.
Should we fear a real estate crash?
Parisian real estate market has characteristics concern: the price per square meter have increased by “only!” a thousand euros in six months , reaching a record high 235% higher than in 1998! Worse, in the meantime, the rates are raised to just over 3% to almost 4%, surpassing the full cost more to buy. Finally, the level of transactions have declined a classic sign of a market turnaround. In short, all indicators turn red .
Moreover, prices started to fall in some areas and even the Center for Strategic Analysis, which is part of the Finance Ministry , says, “their total outstanding credit (…) doubled between 1999 and 2010. (…) It now seems likely that expectations of rising house prices create a bubble on the French property market. ” If long-term rates continue to rise, then the housing market could turn around fairly violently.
More than ever, the economic situation seems unstable. Real estate markets of greatest risk. In fact, it is unfortunate to have to create as many tax deductions that only fuel the bubbles and thereby raise prices, wiping out state aid.