A major contraction in sales, but with prices falling more moderately, was the main message from the Paris notaires for the first quarter of 2009.

Residential sales in Paris and the Ile de France fell by an average of 40% in the first quarter of 2009, compared with the same period in 2008. Total sales in the period were 22,980 (compared to 39,580 a year earlier). The level of sales in this period was the lowest since records began.

Prices of apartments over the same period fell by 1% in Paris, whilst in the three departments around the city – Hauts-de-Seine, Seine and Seine-Saint-Denis – apartment prices are down by 3.5%. In the wider region – Seine-et-Marne, Yvelines, Essonne and Val d’Oise – apartment prices are down by 6.8% in the year.

The fall in the price of houses was more marked, falling by 7.9% within the surrounding departments and 9.0% in the outlying departments.

To some extent this news is to be expected, for the sales being reported by the notaires cover those that were signed during the tumultuous autumn and winter of 2008, when world financial markets went into meltdown. As the completion for many of these sales did not actually occur until the first quarter of 2009, they are being reported in this current property market review.

Nevertheless, although the property reports from French notaires can never provide a glimpse of current market conditions they are the most authoritative guide to the level of sales and of prices in a period, as their records are more complete than those of the French agents.

According to the notaires, within the city of Paris itself prices in some arrondissements continue to show a prices increase in the year, notably in six of the first seven arrondissements (the 5th arrondissement has been the only one of the seven to fall).

The average price of apartments in Paris, as advised by the notaires, is as follows:

Source: Chambre des Notaires de Paris

Outside of the city, the average house price was €319K in the surrounding departments and €263 in outlying departments.

Market Outlook

In their press conference announcing the first quarter figures, the notaires did indicate that, although the market remained slow, there were signs of it picking up again, as sales for April were beginning to suggest.

They considered the increase in activity was being assisted by the fall in interest rates, and by the fiscal incentives introduced by the government to stimulate the market, notably by the increased availability of interest free mortgages for first time buyers, and by the stimulus to the new build rental market given by the Loi Scellier.

Nevertheless, they believe any recover in activity this year will not be reflected in an increase in prices, which they consider will fall in 2009.

In Paris, they forecast that property prices will fall by around 8%, whilst in the surrounding departments by as much as 12%, for those located furthest away from the city.

The notaires remain concerned that a major constraint on an increase in activity continues to be the lending practices of the banks, a point that FNAIM, the French estate agents association, have also been making vociferously in recent months.

However, the banks deny they have changed their lending practices. They argue that the demand is simply not there. That may well be changing, as figures from FNAIM for April actually showed property prices rose in the month and that the prices were relatively stable in May. We shall be providing an update on the quarterly market situation throughout France in our 15th July Newsletter.