April 12 - Standard & Poor's Ratings Services estimates French house prices
could fall by up to 15% by the end of 2013, according to a report published
today titled "
Tighter Borrowing Capacity Is About to End The Uncommon Rise in French Housing
For about five years now, the French residential real estate market has been
going its own way--up. Before 2007, as in a number of other markets in Europe,
French real estate prices had a long run of rapid growth. But, unlike other
markets, the French one experienced only a short correction after the
2007-2008 financial crisis before resuming growth to touch a record high in
"We have found that borrowing capacity is a good driver of French housing
prices. But we expect it--and housing prices in France--to decline through the
end of 2013," said Jean-Michel Six, Standard & Poor's chief economist for
Europe, the Middle East and Africa.
Standard & Poor's definition of households' borrowing capacity takes into
account disposable income, interest rates and average loan duration.
If past trends in borrowing capacity are an indication, the French market is
about to experience a correction. Between September 2007 and March 2009,
borrowing capacity dropped about 7%, and the associated drop in prices was 10%
from March 2008 to June 2009. In the coming 18 months, we project a drop in
borrowing capacity of a similar magnitude, although the downside possibility
of rising interest rates could result in a bigger drop. What's more, we also
expect about a 20% contraction in new housing loans in 2012 versus 2011.
As a result of the weaker borrowing capacity and lower loan production, we
anticipate a drop in house prices of up to 15% by the end of 2013. In that
case, prices would be back where they were in early 2009.
"While the French housing market has gone its own way for a while, it may be
just a matter of time before it meets up with its European peers," added Mr.
The report is available to subscribers of RatingsDirect on the Global Credit
Portal at www.globalcreditportal.com. If you are not a RatingsDirect
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280
or sending an e-mail to email@example.com. Ratings
information can also be found on Standard & Poor's public Web site by using
the Ratings search box located in the left column at www.standardandpoors.com.