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Home prices are skyrocketing around the world

Leggett house prices

“Home prices are skyrocketing around the world” was the headline on CNN last week. Let’s take a look at what they were saying, and see if it’s true in France.

This is taken from the CNN report

It wasn’t long ago that real estate experts were bracing for the worst. The coronavirus pandemic had sent large parts of the world into lockdown, shuttering businesses, costing tens of millions of workers their jobs and putting the housing market into a deep freeze. The number of people asking lenders for more time on their mortgage payments surged as the global recession hit.

Instead, house prices soared even as the world suffered its worst slump since the Great Depression. From New Zealand to the United States, Germany, China and Peru, the same phenomenon has taken hold: home prices are skyrocketing, and many buyers are panicking. Among the 37 wealthy countries that make up the Organization for Economic Cooperation and Development (OECD), real house prices rose by almost 7% between the fourth quarter of 2019 and the fourth quarter of 2020 — the fastest year-on-year growth in the past two decades”.

So why did this happen? Well, the short answer is that world Governments stepped in to shore up the individual property markets and provided massive financial support to businesses and individuals. Add this to record low interest rates and a demand for lighter, roomier, property with outside space and we have record demand and subsequent rising prices.

Here in France there have been well over 1m transactions in the last twelve months, despite the periods of confinement and curfew. This is a quite remarkable statistic. Leggett has seen first hand the demand for “country property with a home office and excellent broadband”. Second home owners are coming to their property for months at a time, rather than the traditional two week holiday.
It is too simplistic to look at the national picture though. Here is what the Notaires de France wrote in a recent report.

“The dynamic is more complex than it seems, given the large gap between the French provinces, where volumes remained strong, and Greater Paris where they dropped by more than 15%.

As such, volumes have clearly held up at national level, but in very different ways.

In Greater Paris, the underperformance of volumes is already having an impact on prices: prices are rising less quickly than in previous quarters (+0.5% between Q2 and Q3 of 2020, after +1.8% and +2%) – a trend confirmed for inner Paris by the leading indicators from pre-contracts. Therefore, year-on-year prices will have increased less in the French capital than in the whole of the Greater Paris region, something that has not happened since 2013″.

In essence, whilst prices continue to rise in Paris (and other cities), they are not rising as quickly as in the country – we feel that this is a natural correction after a long period of flaming hot markets in the major French cities.