French Home-Price Drop Seen Accelerating in 2014

French house prices will probably fall by as much as 4 percent this year after dropping 2.9 percent in 2013 as buyers were deterred by unemployment, taxes and regulations, a property-brokers group said.

Sales of previously-owned houses and apartments may drop to around 650,000 from 668,000 last year, the FNAIM French federation of 12,000 brokers, said today. Transactions declined 5.1 percent in 2013 to a four-year low.

“There’s a wait-and-see attitude among clients because of fears about the future, and uncertainties about growth and unemployment,” FNAIM Chairman Jean-Francois Buet said at a press conference in Paris today. “Investors are also facing uncertainties about a government plan to cap rents, and about capital-gains taxes.”

President Francois Hollande, faced with the highest unemployment in almost 16 years, is set to outline a plan today to revive an economy that has barely grown over the past two years. The president has raised tax levels to a record to reduce the country’s budget deficit.

The number of new home loans will “clearly fall” this year after being spurred by record-low interest rates in 2013, Philippe Taboret, deputy chief executive officer of Cafpi SA, France's largest mortgage broker, said at the press conference. Mortgage rates may rise by between 0.5 and 1 percentage point this year as U.S. monetary policy affects Europe, he said.

Home prices in Paris fell 3.2 percent last year to 8,706 euros ($11,900) a square meter, FNAIM said today. Berlin values climbed 42 percent, while German prices overall were unchanged, real estate broker ERA Europe said today.

In Switzerland, prices rose 9.6 percent last year, with an 18 percent jump to 10,971 euros a meter in Bern, ERA said. Values increased by 14 percent in Sweden and gained 5.6 percent gain to 3,655 euros in Stockholm. Prices dropped 9.5 percent in the Netherlands, with a 0.5 percent fall to 3,024 euros in Amsterdam, the broker said.

source: Bloomberg - 14 Jan 2014