French house prices down 1.5% for 2014

House prices fell in most regions in France in 2014

Picardy led the way with price rises of 3.5%, Lower Normandy saw prices rise by 1.2%, Poitou-Charentes by 1%, Languedoc-Roussillon by 0.9%, Auvergne by 0.8% and Brittany by 0.4%. Elsewhere prices fell, most notably by 5.3% in Nord pas de Calais, by 5.1% in Limousin, by 4.9% in Upper Normandy, by 4.8% in Franche Comte, and by 4.3% in Champagne Ardennes.

Century 21’s annual review put the average fall in property prices at 2.8%. The data shows only one region with rising prices, Limousin with growth of 3.7%. Everywhere else show falling prices, most notably a decline of 7.4% in Languedoc Roussillon, a fall of 7% in Lorraine and 6.7% in Poitou Charentes.

France's house prices flat last quarter

Prices down 1.2% on a yearly value after a 1.9% drop the previous quarter. 0.0% for the country as a whole on the quarter vs. 0.5% fall for the Paris region. The fall was halted by stimulus measures, it seems. Has France’s property market turned a corner?

Faced with a newbuild shortfall and the failure of its "Target 500K" initiative to build half a million new houses every year to 2017, the government unveiled a slew of measures in early July to boost the sector. These include the simplification of construction rules and regulations as well as the extension of the "0 percent interest loan" to boost middle and low-income first-time buying.

IMF's most overvalued housing markets around the world

Era of Benign Neglect of House Price Booms is Over

Theory asserts that house prices, rents, and incomes should move in tandem over the long run. If house prices and rents get way out of line, people would switch between buying and renting, eventually bringing the two in alignment. Similarly, in the long run, the price of houses cannot stray too far from people’s ability to afford them––that is, from their income. The ratios of house prices to rents and incomes are thus often used as an initial check on whether house prices are out of line with economic fundamentals. 

Hence we also need macroprudential policies aimed at increasing the resilience of the system as a whole. The main macroprudential tools used to contain housing booms are limits on loan-to-value (LTV) ratios and debt-to-income (DTI) ratios and sectoral capital requirements (Figure 4). Hong Kong SAR has imposed caps on loan-to-value and debt-to-income ratios since 1990s, Korea since 2000s, and during and after the global financial crisis, over 20 advanced and emerging economies have followed their example.

Another macroprudential tool is to impose stricter capital requirements on loans to a specific sector such as real estate. This forces banks to hold more capital against these loans, discouraging heavy exposure to the sector. In many advanced economies—Ireland, Norway, and Spain— and emerging market economies— Estonia, Peru, and Thailand— capital adequacy risk weights were increased on mortgage loans with high loan to value ratios.

IMF have posted several graphs. (Yes, they let a graphic artist go a bit wild with them…)

According to the blog, Belgium is an exception to being in trouble, despite the higher than average price to income and rent. That leaves Canada as the most troubled country on both measures with New Zealand and Australia not far behind. Also flirting with a worrisome bubble are France, UK, Sweden, Norway.

IMF have also launched a new site to pull together all their data on world housing markets.

IMF's New Global House Price Watch

Real Estate Highlights of Credit Suisse Wealth Report

Global Wealth 2013

India

Along with most countries in the developing world, personal wealth in India is heavily skewed towards property and other real assets, which make up 86% of household assets.

France

Much of the pre-2007 rise was due to the appreciation of the euro against the US dollar. However, France also experienced a rapid rise in house prices, as a result of which real property now accounts for about two-thirds of household assets. Personal debts are just 12% of household assets, a relatively low ratio for a developed economy..

Australia

nterestingly, the composition of wealth is heavily skewed towards real assets, which amount on average to USD 294,100 and form 59% of gross household assets. This average level of real assets is the second highest in the world after Norway. In part, it reflects a sparsely populated country with a large endowment of land and natural resources, but it is also a manifestation of high urban real estate prices.

Canada

The long-term rise in real estate was interrupted only briefly, and since 2008 the market has seen both new construction and house price increases. Rapid growth in mortgages has fuelled a continuing rise in household debt. Mortgage terms were tightened in 2012 and the market cooled somewhat, but there are continuing concerns. It is not clear whether the final landing will be soft or hard.

Gravity is making itself felt on property prices worldwide

Gravity has taken hold of property markets around the world. And this is still under the effects of unusually low interest rates.

Searching for Solid Ground

AFTER years of dizzying ascents, a big dose of gravity has hit residential-property markets around the world. According to The Economist’s latest round-up, year-on-year prices are now falling in 12 of the 21 countries we track; in five of the other nine, prices are rising at a slower rate than they were a year ago.

The standouts on overvalued:
Hong Kong 64%
Canada 54%
New Zealand 44%
Belgium 55%
Singapore 58%
France 43%
Australia 36%

Even places like Sweden and Netherlands at 25% overvalued have some pain coming before they reach ground level. And Spain still has nearly that far to go despite already falling 22%.

What Markets are Above Fair Value? DB Report

A chart from Alan Ruskin at Deutsche Bank showing the countries that having housing markets that still have not adjusted to fair value by the usual measures of price to income and price to rent ratios.

For the text record the worst remaining un-busted housing markets are:
Belgium
Canada and Norway in a close tie for second
France Australia vying for fourth
NZ and Netherlands
UK
Spain
Finland (overvalued strictly on Price to rent)
Denmark
Italy (overvalued mostly on Price to income)

Of housing booms and busts

The problem for the likes of Spain, the UK, Denmark and NZ, is that even after the adjustment, these markets are still substantially overvalued at least by these widely used metrics. The Spanish data would tend to point to an adjustment in these ratios by a further 25% before fair value is reached – presumably mostly through house price adjustments. This is before any overshooting, related to constrained policy, is considered.

The only thing that could save the Spanish banks at this point given the extreme pain from the small correction so far is polar melt causing the gulf stream to shut off precipitating a mass migration. (How's that for a doomer angle on it?)

Hat tip: VREAA

OECD and Deutsche Bank Rank the Most Overvalued Countries

The Most Overpriced Housing Markets In The Developed World
Country - Over valued by:
Italy - 10%
Denmark - 17%
Finland - 22%
Sweden - 25%
Spain - 33%
UK - 34%
Netherlands - 36%
Australia - 39%
France - 42%
New Zealand - 44%
Norway - 48%
Canada - 54%
Belgium - 56%

I don't actually agree with this analysis that the U.S. is 9% undervalued. I would have put it at 7-8% overvalued. But given the wide differences between markets, it probably comes down to the weightings. For example, because Las Vegas and Arizona overbuilt without regard to lower population, many of those houses simply shouldn't count in the analysis. Also, if they are using average incomes, that completely ignores that most of the gains in the last decade went to the top few percent and isn't available to the middle class at large to invest. But this isn't about places finding a bottom. It's about those that are doing an excellent impression of Wile E Coyote.

Checking in on France's Housing Bubble

The loans granted in January plummeting (warning google translate)

The amount of loans granted by banks recorded a very sharp decline in January, falling 25.7% over the corresponding month of 2011, according to a study by the Observatory Credit Housing / CSA ​​published Monday, February 6.
"The year 2012 did not start very well. In a sluggish economy, the backlash movement anticipation of the end of 2011 is significant," notes the study. On a monthly basis, the collapse is indeed brutal: - 49.4% between December 2011 and January 2012 (after already falling by 34.1% between December 2010 and January 2011). "It's a blow. The fall is comparable to 2009, when the U.S. subprime crisis, "said Michel Mouillart , professor of economics at the University of Paris West and industry expert.

Surprised they held out that long, given the environment there.

As you can see from the Economist's Clicks and Mortar graph. France is between Canada and Australia for bubbling on the measure of prices relative to incomes.

Oh my, that doesn't capture the situation.

Borrowed from bulle-immobiliere

Hat Tip: Makaya commenting at Vancouvercondo.info

Added: per discussion of Australia's line on the chart

Australia house prices 1970-2003
Chart from Abelson, Joyeux, Milunovich, & Chung

Looking at this, you can really see the market cycle peaks.  1974, 1981, 1989, ????. And what a markedly V shaped "recovery" in 1987. No wonder people want to jump into houses at the first sign of a upward move in Australia, they have been trained to it.

Here is a chart of disposable income. On a log scale.

Real Gross Disposable Income, Australia 1970-2003
from Abelson, Joyeux, Milunovich, & Chung

It looks like there was a burst in wage levels from 1970 to 73. By 74/75 that growth had stabilized to what became the normal rate for the next two decades. The peak in the market above is 1974. Looks like there was an overshoot on prices in that year, or overbuilding that left the market saturated. Or both?

I turned on a few more lines for reference. This chart is zeroed to 1984, which makes it easier to see. 83, 84, 85 were pretty stable years for prices.

Checking in on Other Housing Bubbles: France

French Real Estate: A Little Bubbly

It is a mistake to treat real estate as a safe haven, says Hervé Boulhol, the Organization for Economic Cooperation and Development's France economist, as such an underestimation of risk can, in turn, inflate a bubble. Until the end of 2009, the OECD had been able to explain price movements in the French market with fundamental factors, but in 2010 their usual econometric calculations based on factors such as cohabitation rates, credit conditions and household incomes failed to explain what was going on.

"This may signal a bubble phenomenon, as a bubble is a disconnection with fundamentals," Mr. Boulhol says.

Prices this year may already be moving out of reach of buyers, causing demand to fall, says Mr. Eluere of Crédit Agricole. And the worsening economic outlook and concerns about tougher taxes are further a disincentive to buy.

In some areas, the turnaround is already becoming evident. Notaries registered a clear fall in sales this summer, which hails "a much less certain real-estate cycle in coming months," Notaires de France wrote in a note published early this month.