How will the French election impact the property market?

This April, voters in France will go to the polls to choose their next President. What impact will the election have upon the property market?

Traditionally, foreign buyers pay little attention to the polls, says Tim Swannie, Director of buyer agency Home Hunts. After 2016’s dramatic year of surprises, though, with the UK voting to leave the European Union and America electing Donald Trump as President of the United States, investors are not taking any chances.

“Everyone has become a lot more politically aware,” says Swannie. “The French elections have also had their fair share of scandal, which have hit the headlines around the world, so we are finding more clients asking about the situation.”

The candidates range from centre-right Republican Francois Fillon, centrist Emmanuel Macron and the Socialist Party’s Benoit Hamon to far-right National Front candidate Marine Le Pen.

Investors are particularly concerned about the possibility of a Le Pen victory, which would raise the potential for a French exit from the European Union. The electoral system in France, though, is different to the UK, with the five main candidates whittled down in April’s vote, before a second ballot in May chooses between the top two candidates.

“Although Marine Le Pen is getting a lot of coverage, in reality, it is unlikely that she will be voted in,” explains Swannie.

Indeed, foreign buyers are already voting with their money, as the housing market’s growing strength outweighs any caution about May’s unlikely result.

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“The housing market is strong in most areas of France at the moment,” comments Swannie. “Since the global crisis of 2008-9, prices did come down in many areas but prices leveled out and have been stable for the past few years with specific areas such as the French Riviera, Bordeaux and Paris, for example, showing an increase in prices over the last 12 to 24 months.”

In the last quarter of 2016, according to INSEE, French property prices climbed 1.8 per cent on average, up from 1.3 per cent in the third quarter and 0.6 per cent in the second. Central Paris (4.4 per cent) and the Ile-de-France region (3.1 per cent) led price growth, with the rest of France seeing values climb by a more moderate 1.3 per cent.

Sales, meanwhile, hit an all-time high in the 12 months to December 2016, according to the French Notaires, reaching 848,000 and even surpassing May 2006’s record figures. In Paris, sales of existing homes jumped 8 per cent, while sales of new homes rose 10 per cent.

With transactions up, the Notaires forecast further price growth of 3.7 per cent, boosting the appeal of French real estate to overseas investors. Indeed, on TheMoveChannel.com, enquiries for property in France rose 12 per cent month-on-month in February 2017, and 16 per cent in the three months to February compared to the previous three months.

“The quality of British enquiries has improved, the people who are looking seem to be serious and ready to make decisions”

The result is a market that has moved on from a period of “wait-and-see” to a period of “beat-the-recovery”. For US buyers, the dollar’s strength means that French property is attractive and affordable, particularly before values eventually rebound to their previous levels. Most notably, Leggett Immobilier has seen increasing demand from French buyers too in the last three months, a promising indicator that the market has bottomed out.

British buyers, meanwhile, have started to recover from any initial Brexit shock. Leggett chairman Trevor Leggett reports that enquiries have risen 34 per cent over the past three months from people in the UK seeking to buy property in France, compared to the same period 12 months ago.

Home Hunts, which specialises in luxury property, has seen a reduction in British enquiries, which it attributes partly to the weakening pound against the euro, but the enquiries the company receives now are from more serious Brits than before.

“What we have certainly noticed is that the quality of British enquiries has improved, the people who are looking seem to be serious and ready to make decisions quite quickly,” says Swannie. “We are hearing from some clients that they would like to buy their holiday home now, before the UK leaves the EU, in the hope that being a homeowner in France or Spain will help when it comes to their future freedom of movement in Europe.”

The number of people looking to relocate to France permanently, meanwhile, has also risen slightly, whether they are seeking to work in Paris, live in the French Alps, close to Geneva, or families looking for properties with income potential, such as vineyards.

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Mortgage rates have been a major driving factor in the French property market’s recovery in the last year, making houses more affordable for both domestic and foreign buyers. Even Brits have found that “back to back” loans, available from several of the bigger French banks, are a way to avoid being hit by the pound’s exchange rate.

“Cash buyers can deposit their money in sterling with the bank and then take a mortgage of the equivalent amount in Euros to buy their property,” explains Swannie. “The beauty of this kind of agreement is that once the pound gains some strength again, whether that is in one year or 10 years, you can then pay off the mortgage in full at that point without penalties.”

Which locations are coming out on top in the polls? French Alps resorts, such as Morzine and Chamonix, are favoured safe havens for investors, while prices have stabilised in hotspots such as Marseille and Montpellier. Toulous, Bordeaux and Nice, where values are beginning to increase, are also popular candidates.

Conditions, though, are not going to stay so favourable forever: mortgage rates are starting to climb from their record lows. Combined with rising property prices, overseas buyers are taking action at the start of 2017, before costs increase. The result of the presidential election may not be known until May, but for now, France’s property market has won the all-important vote of confidence.

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