House prices remained stable in the third quarter, with the exception of Paris where prices rose, and some regions, where prices continue to fall.

According to FNAIM, the national association of French estate agents, the level of sales activity continues to increase, but with no general increase in house prices, a viewpoint they have held since the beginning of the year.

The following image shows the general picture for house prices across the country over the past twelve months.

Source: FNAIM

The only regions of the country where house prices have risen are the Ile de France, Aquitaine, Provence Cote d’Azur and Brittany.

They have fallen in Lower Normandy, Picardie and Lorraine, and have remained fairly stable elsewhere.

However, there is far less detail in the report from FNAIM than is normally the case, suggesting that they are far less confident of their analysis than may have been the case in the past.

There appears to be a similar lack of confidence in commenting on the state of the market outside of Paris by the French notaires, who reported recently that prices in the second quarter had risen by 6%, but it seems most of the evidence for this increase was based on what was happening in Paris and the Ile de France.

Century 21, one of the largest chain of estate agents in France, have been more bullish in reporting price increases in many parts of the country, but even they are stating that prices continue to fall in some regions, notabaly in Burgundy (-5.9%), Auvergne (-4.5%), Lower Normandy (-2.27%) and Champagne-Ardenne (-2.25%).

In the towns and cities, and particularly in popular urban areas, demand simply exceeds supply, which is inevitably pushing up prices.

As far as international buyers are concerned, Trevor Leggett of Leggett Immobilier, with offices in many areas of France, says that: 'Although the French to French market in the countryside is slow, we are seeing a considerable increase in Northern European and UK buyers, who seem more than happy to take advantage of the sluggishness of the market.'

'In some areas of the country these buyers are capable of soaking up the supply of good quality properties, and in turn driving prices back up, as they have in the past,' he says.

Market Outlook

FNAIM forecast that for the year there will be an increase in prices of between 2% and 3%, a slightly more upbeat forecast than they made at the beginning of the year, when they felt prices could go either up or down by 2% or 3%.

One of the main reasons for the improvement in their forecast is because of the fall in mortgage interest rates, which, at an average of 3.3%, are at their lowest for over 50 years.

Other factors driving the market are the prospective end to mortgage tax relief, as well as a reduction in tax breaks for investment properties, both effective from 1st January 2011.

Interestingly, public opinion is also more expectant about the prospect for house prices, with one in two respondents in a recent Ifop-FNAIM opinion survey anticipating an increase in prices over the next six months, against one in three who held this view in March. Only 8% of respondents considered that prices would fall, and 42% stated prices would continue to remain stable.

Against the backdrop of a high level of unemployment and many household budgets under pressure, such a view may seem surprising, but it is also important to factor in the demand arising from demographic growth, and the substantial shortage of accessible homes in many areas of France.

Whatever the outlook for prices, one thing is clear; the level of sales activity is significantly up across the country over last year. FNAIM estimate that sales will exceed 700,000 this year, against less than 600,000 last year, and over 800,000 in 2007.