'French housing market stands out' - says Wall Street Journal

Wall Street Journal – September 2011

 ‘France's housing market has stood out over the past few years. As Spanish and U.S. real-estate markets collapsed following the fall of Lehman Brothers Holdings Inc. in 2008, French house prices fell only slightly and not for long. Prices quickly began to recover at the end of 2009, led by a surge in Paris.’

‘The market's strength can be partly explained by a lack of new building, with the construction sector hampered by a scarcity of buildable land in densely populated areas and regulatory barriers to new construction, the International Monetary Fund said in a recent report on the French economy.’

‘Low interest rates have multiplied the effect of government measures on demand, while banks' conservative lending practices helped preserve households' solvency.’

"Unlike in Spain, for example, French banks grant loans depending on the capacity of households to repay, not based on the potential value of the asset in the future," says Alexandre Mirlicourtois, economist at financial consultancy Xerfi. Credit doesn't exceed a third of household income, and most property loans come with fixed interest rates and maximum repayment periods of 25 years.’

‘A key measure that has supported the housing market is the Scellier law, which reduces taxes for people who buy new-build, buy-to-let property.’

‘Mr. Boulhol of the OECD says even if prices fall sharply, he doesn't expect disaster, as French household debt is relatively low and banks' conservative lending practices mean there tend to be few defaults.’