Interest in the French real estate is growing consistently. So says one of the world's leading real estate agencies Leggett Immobilier. In the first quarter of 2013, the company noted the growing number of foreign investors, which was due to lower rates on mortgages and reasonable pricing.
It is certain that the conditions in the French market are becoming increasingly favorable for buyers. Mortgage rates are at the lowest level in 65 years and the recession has forced developers and vendors to reduce prices to more acceptable levels. However, investors still need to have their own funds as lending in France is limited like in the rest of Europe though.
Moreover, the real estate market is not in the best condition at the moment even despite the signs of improvement. Trevor Leggett, chief executive of Leggett Immobilier, pointed out that the overall level of French real estate sales fell by 20% to 655,000 transactions last year and the same level of sales is expected this year. But it is equally clear that the market will recover in the coming years and with such "cheap" price tags as they are now it's the high time to buy. He added that, according to unofficial data, developers also tend to have more realistic pricing as they realize that high price of objects does not meet current situation.
The French market is also under close scrutiny of European lenders. Major players, who serve real estate transactions, perform a vital role in the survival of any real estate market. And France is very fortunate to have that attention of creditors now. Wall Street Journal reported that the activity of lenders has increased primarily in the luxury segment of the market. This helps to increase competition and reduce the overall cost of funding.
Many experts have noted an increase in the level of lending in France over the past two years. This became possible due to the presence of non-traditional lenders on the market such as insurance companies and private investment firms. William Newsom, the chief appraiser of Savills, reported that a large number of new lenders entered the market within just a week. New players are ready to provide even larger loans up to £100 million (€116.5 million).
So where do these lenders come from? According to the Wall Street Journal, the main contribution to this expansion has been made by investment banks of America, China and Japan. However, sovereign funds have been also increasingly active, particularly, Singapore Government Investment Corporation. AXA Company is the only non-bank lender that is expected to increase its activity this year.
It is planned that AXA will provide loans amounting to €2.5 billion in France, Germany and the UK in 2013. A representative of Allianz Real Estate GmbH acknowledged that the company is going to provide €5 billion of loans in France and Germany in the coming years.
These investments will be very timely for the French real estate market, which is struggling with the consequences of recession. The National Institute of Statistical and Economic Research claims that the value of real estate in France has decreased by 1.63% in 2012 compared to the previous year. When adjusted for inflation the drop was 3.12%.
Text: Ivan Ulitin, ee24.com