French property boom fuels fears of bust

Bubble or not, France's buoyant housing market is fuelling high-level fears that a post-crisis boom could turn to bust.

From the central bank to the International Monetary Fund and rating agencies, officials are careful to avoid describing the euro zone's fastest growing house prices as a bubble, but they do not hide concerns about the risks to the broader economy.

Underpinned by particularly strong growth in the Paris market, French property prices rose 8.7 percent year-on-year in the first quarter of 2011 — more than any other OECD country for which figures are available.

Ratings agency Moody's Investors Service believes the French housing market is overheating and that while French banks can absorb a likely moderate house-price correction, the least cautious lenders could face steep losses in a more severe drop.

Source: Reuters