French government meets €500 million for 2012 but unable to use it to reduce debt level.
The French government surpassed its goal of making €500 million from state-owned property in 2012. However the overwhelming majority of this money has had to be used to meet the overheads of properties still in its portfolio rather then paying off national debt, as was the stated intention.
Plummeting Prices
Failure here stems from the fact that the €515 that President Hollande’s administration received from these sales was considerably less than the potential value of the properties. Prices plummeted after Europe’s banking crisis and France’s property market has found it harder than elsewhere in the continent to recover from the recession. There is more pessimism in this once key market than anywhere else in Europe, and that includes a Greece in economic free fall. The Economist’s housing price index reveals that France remains the most overvalued property market in the Eurozone. As such any continuation of this strategy to pay off national debt through state property sales could prove equally fruitless in the future.
In this context it may have been prudent to wait until the market had recovered somewhat before placing these properties on the market but financial pressure on the government elsewhere and the declared objective of Hollande to tackle the country’s spiralling debt has meant that this was not possible. Market analysts also predict further devaluation in French property as a consequence of the current risky investment climate here and, together with the continuing economic problems across the Eurozone investors will continue to stay away from the country.
Stimulating, or Harming The Property Market?
The low value of these properties is also ironically a consequence of government attempts to stimulate market investment. Interest rates in France are the lowest they have been since the second world war in an attempt to attract investment in properties around France’s sparsely populated and beautiful countryside. And as with elsewhere in Europe France has increased taxation, with Hollande focusing on France’s wealthy and increasing tax forcing many of the country’s wealthy out of the country as they look for securer markets for their financial assets. This has meant more properties competing with those state-owned for sale and has made it easy for buyers to negotiate down the listed price as owners look for a quick sale.
However an agreement has been reached to inject 12 billion euros into the market to stimulate its recovery and this is cause for some optimism about the French property market in the future.
Conclusion:
As is usually the case in European property markets sometimes the prices can fluctuate widely. The key thing to remember is that this can be advantageous to both buyer and seller, so the door really does swing both ways. The difference is is that some people are ready to take advantage and others are not. Taking your time to buy can mean you get a great deal and likewise waiting to sell. It’s always a gamble though as prices can rise and fall even further, but one that is still likely to pay off in the end.
Tony lives and breaths property and currently runs http://www.countryhomesfrance.co.uk/ a French property Web site based in the UK.
