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French Real Estate Loses Its Fizz

ERIC GAILLARD/REUTERS

By Carol Matlack in Paris

French Real Estate Loses Its Fizz

After largely escaping the woes of neighboring Spain and Britain, France’s housing market has gone as flat as day-old champagne. Prices are down as much as 8% this year, according to the association of real estate agents, with a total decline of up to 15% expected by the end of 2009. And transactions in 2008’s first half were down 25% from the previous year. A study by credit-insurance group Euler Hermes shows bankruptcies of real estate agencies soared 28% in the same period.

With French unemployment already at 8% and housing industry leaders warning of big job losses, President Nicolas Sarkozy announced the government will buy as many as 30,000 unfinished new homes languishing on the market.
What finally caused the fizzle? Although France avoided a U.S.-style mortgage crisis, thanks to conservative lending practices, the market simply overheated. Home prices rose 210% from 1995 to 2008, even more than the 190% rise in the U.S. One factor: droves of British and American buyers, who snapped up everything from Provençal farmhouses to Paris pieds-à-terre.