Over the year (when compared with the previous 12 months), house prices fell by an average of 5.6% (flats by 4.2%), well below the anticipated fall of around 10% expected by most pundits.

This analysis of a single digit average fall in prices for 2009 is broadly shared by most other observers of the market, including the notaires and the major national agents who each do their own regular analysis of the market.

The 10% fall in house prices can only be discerned over the past two years, while flats have fallen by 5.4% over the same period, according to FNAIM.

After two successive years of a fall in prices, they are now at a level where they were at the end of 2005.

Given the spectacular rise in prices of 140% between 1997 and 2007, FNAIM argue that ‘the bubble has not exploded, it has just begun to deflate gradually.’

FNAIM consider that cheap credit and a rise in household incomes over the past decade has contributed in controlling the fall in prices, although they acknowledge that ‘those with the most modest incomes’ have been driven out of the market.

This point gets greatest confirmation in a recent report from the Observatoire du crédit logement, who noted that buying a property required on average 3.2 years of income in 2001, against more than 4.3 in 2009.

This may well be one reason why it was a very quiet year for actual sales, with only around 550,000 sales for the full year, a fall of 21% over 2008, down to a level not seen for the best part of a decade.

It was also a very similar picture for new construction starts and new planning consents.

The average national fall in prices also disguises some significant regional variations. Largest fall in house prices occurred in Poitou-Charentes where prices fell by 15.3%. Other large falls occurred in Nord-Pas de Calais (15.2%), Provence-Alpes-Cote d’Azur (12%), Picardie (11.1%) and Centre (9%).

Source: FNAIM

In the larger towns and cities the fall is close to, or exceeds 10%, in Toulouse, Grenoble, Clermont-Ferrand, Orléans, Strasbourg and Troyes. All other major cities have decreased except Cannes (+1.1%) and Bordeaux (+0.7%). Prices in Paris fell by 1.8%, but with large differences across the city.

Outlook for 2010

To the surprise of some observers FNAIM argue that the market seems to be 'in balance with the fundamentals’, as a result of which they do not exclude the possibility of price rises in 2010.

Nevertheless, given the uncertainly in the economic outlook they are cautious about any firm predictions for this year, so they have rather hedged their bets by forecasting a stablisation of prices in the range -3% to +3%.

This is a scenario that is also generally supported by the national estate agent chain Century 21, who consider that prices may rise between 1% and 3% due to strong demand, a shortage of properties, and cheap credit conditions.

The agents report a recovery in the number of sales in the last quarter, and consider that as long as credit conditions remain favourable, this trend will continue.

Others are a little more cautious about the outlook, notably Orpi, another large national chain of agents, whose president Bernard Cadeau stated recently that 'the pick-up in the market is real, but fragile.'

National agents Lafo­rêt Immobilier likewise consider that prices will remain stable this year, but that no real recovery in the market can be expected before 2011 or 2012. 'To take out a loan for 20 to 25 years assumes confidence in the future, and with uncertainties about the economic recovery omnipresent, no substantial increase in the level of activity can be anticipated', they stated in a recent report.

Credit Agricole also argue that there will be no recovery in the market in 2010, and that prices of older properties are likely to continue to fall slightly, due primarily to low demand in the face of uncertainly and a 10% rate of unemployment.

'With prices having only fallen by a moderate amount, household creditworthiness has improved only slightly, prices remain overvalued, and the cost of acquistion remains too high for many buyers', they argued in a recent report. They consider a fall of a further 10% in prices is necessary to restore buyer purchasing power.

The major online mortgage broker Meilleurtaux also considers no upturn is likely next year. ‘As long as households have no great confidence in the future, and while unemployment remains high, it is difficult to anticipate a major resumption of house buying in 2010, even if interest rates remain low’, said Sandrine Allonia, head of economic studies at Meilleurtaux.com.