sjioverseas-sunshine homes

NO.17 July 29th .2011   French mortgage trends: Good summer buying conditions in France News from across the Channel is that we are experiencing good market conditions for buying French property. For the next few months at least, the outlook for rates is stable, with a chance of slightly lower fixed rates in August and September. Whilst some commentators have suggested we are seeing a bubble beginning to form concerning French property prices, due to the extended period of low rates, we are nowhere near the levels of price rises seen between 2002-2005 with Jean-Philippe Cotis, of the French National Institute for Statistics, not seeing any “imbalances”. The relatively small increases in both house prices and interest rates already seem to have put the brakes on the numbers of transactions in the French property market, which remain at 2007 levels with more sellers than buyers. The Federation of French Estate Agents predicts the increase for this year to maintain the same levels seen in2010 at an average 3%-6% across France. This is largely based on interest rates which are still extremely attractive (examples below). Compared with average prices for the 2nd quarter last year, house prices are up 5% and apartments up 8.6% making an overall increase of 6.8%. Comparing July 2010 to June 2011 we find the overall increase to be +3.8% versus +1.5% in 2010 and -4.90% in 2009. These increases have brought average French house prices back in line with levels last seen in 2007 when interest rates were 1% higher on average. Better news is also to be had on the competition amongst French banks for clients. After an initial retrenchment by the banks – in terms of strengthening of criteria due to the market contexts of an increase in regulation, the number of defaults and the cost of liquidity – there now seems to be a slight overall increase again in the levels of loan to value on offer. In addition, bank committees have also softened their approach further, with more applications succeeding first time around. Happy house hunting! John Busby, July 2011 PS. For those who like advance warning of change, our newsletter and website will change branding during August. Please let us know what you think when we launch the changes Best buys Repayment Rate Duration LTV Description 2.70% 20 years 60% Tracker mortgage +1.10% 3.70% 25 years 80% Rate capped + 1.00% max 4.70% 4.00% 25 years 80% Rate capped + 1% max 5.00% 3.95% 30 years 85% Rate capped + 1.5% for 10 years. 4.65% 25 years 100% Rate capped + 1% max 5.65% 4.35% 25 years 80% Rate fixed for the term 5.00% 30 years 80% Rate fixed for the term Interest Only 3.20% 15 years 70% Tracker +1.90% 3.85% 7 years 80% Tracker +2.40% 3.95% 7 years 70% 2 year fix, then Tracker +1.40% >> See complete list *10 years French market trends   Average loan rates 3.85%   Average bank margin 1.85%   Annual house price + 6.5%*   French inflation rate 2.0%   ECB base rate 1.25%   3 month Euribor 1.61% TEC 10 3.33% Change based on previous monthly rate Currency Watch Currency /EUR 1 GBP 1.12 1 USD 0.69 1 AUD 0.75 1 JPY 0.0088 French property market trends: A look back to 2010 French house prices increased by 141% from 1998 to 2010 according to the French National Institute of Statistics and Economic Studies. And 2010 saw the return to positive growth for the French property market after a rocky 2009. The number of transactions by foreign buyers in France amounted to over 50,000 in 2010 versus almost 40,000 in 2009 – an increase of over 20%, which was also seen in the market for French property sold to French nationals which approached 800,000 transactions, a level last reached in 2007. The average loan amount was up 10% to €210,000 based on an average transaction amount up 6% to €238,000, with approximately 30% of buyers taking a mortgage. The most popular areas were Paris with 35%, Province/Cote d’Azur with 13%, Rhône-Alps with 11% and the Languedoc Roussillon with 5%. British buyers represented 11% of the market overall with close to 6,000 recorded transactions in 2010. The Brits are the number one overseas buyers in the Languedoc Roussillon, followed Aquitaine, Midi Pyrenees, then Normandy, Brittany, Poitou Charente and the Limousin. In terms of numbers of transactions, the highest level for British buyers could be found in Province/ Cote d’Azure, after the Italians. In Paris the numbers of recorded transactions by British buyers was limited to approximately 400. Overall the profile of those buying in France has changed over the last few years and affluent buyers are now starting to come from emerging market economies. The sector has seen large increases in the numbers of Russian and Chinese buyers. Currency update: Euro Currency watch The seemingly endless saga of Greece, Ireland, Portugal, debt and contagion is almost certain to run into a third year. Having initially assured investors that Greece was perfectly capable of supporting a huge and growing deficit, the EU admitted defeat last spring. The wealthy Euroland nations clubbed together to lend Greece even more money. This bailout, the EU insisted, would solve the problem once and for all. It gave the same assurance when it later had to rescue Ireland and Portugal on similar terms. Now, Greece needs to borrow yet more money and Portugal is waiting in the wings for a second handout. This July Eurozone leaders agreed on a new plan that will cover those three, together with any other country which might find difficulty in selling its government bonds to unwary investors (Italy? Spain?). This plan will solve the problem once and for all. Not surprisingly, investors are sceptical. They have heard it all before. They are also now worried about a totally self-inflicted debt problem with which Washington has saddled itself. The Republican House of Representatives wants to cut public spending. The Democratic Senate and White House want to raise taxes. Withoutan agreement, there will be no sign-off for an increase in the "debt ceiling", which limits the total amount the government can borrow. Without an increase the government will run out of money. Almost whatever the outcome of the negotiations, global investors' trust in America and the dollar will have been damaged. Britain's economy grew by just 0.2% in the nine months to June. Technically, it amounts to a recovery. Practically, the growth is so minimal that only a statistician would notice it. Interest rates will remain low for an indefinite period. Three basket cases; three currencies that nobody really wants to buy. It is less a matter of picking a winner than of avoiding the biggest loser. Faites vos jeux!