No. 32 - July 2016

With volumes close to pre-crisis peaks, prices remaining essentially stable and interest rates at their lowest, all the ingredients are present to encourage sellers and buyers to return to the market.

The combination of these factors is favourable to the implementation of projects and restores confidence and vitality to an entire sector.

The French National Institute of Statistics & Economic Studies' (INSEE) index of households' confidence shows this renewal of consumer optimism. With a score of 97, French house-holds appear to be on the verge of becoming "optimistic" once again. It is true that the savings realised by the fall in interest rates has enabled some people to buy up to one additional room for the same budget and that the renewed fluidity of volumes gives others the desire to take action.

Volumes close to peaksIn older properties, the market has returned to the number of annual transactions seen before the 2008-2009 crisis (i.e., 830,000 at the end of April 2016). The annual rise in volumes has reached 19%. The statistics on pre-contracts show that the trend is continuing and could hold at these high levels. The widespread fall in prices from 2012 to 2015 (except for a few regional cit-ies with property markets characterised by high demand and limited supply, such as Bordeaux and Lyon) minimises the risk of a property crisis.

In new construction, the first part of this year was marked by this same situation. The increase in the number of properties approved for construc-tion (+7.4% compared to the period April 2014–April 2015) and the fall in the average time to start construction of houses and apartments confirms the outlook for an active market over the long-term. Finally, the decrease in sales times should be noted.

Moreover, an increase in short-term interest rates is unlikely.

Crédit Foncier estimates that between 2014 and 2016, the fall in interest rates combined with the fall in prices has given potential buyers 8.5% more purchasing power, without measuring the impact of appeals against building permits.

If prices should rise over the coming months, this would have very little impact provided the increase remains modest. This would then amount to a zero sum game, where the price increase is offset by the fall in interest rates. This is what we saw over the last quarter for some transactions.

These cumulative effects of low interest rates, henceforth attractive prices and high transaction volumes should generally result in a rebalancing of supply and demand and therefore the seller/buyer relationship.

Caution about a flash in the panThe fall in mortgage rates alone cannot perma-nently and solidly sustain the upturn in volumes.

After an increase in the order of 25% in mort-gage volumes between the low point in 2014 and 2015, mortgage volumes have increased by just 3.2% in 2016, suggesting an increase of about 5% over the entire year (source Crédit Logement/CSA).

According to the Banque de France(1), 85% of new mortgages are used to acquire a principal residence.

The new interest-free loan (for purchases of older properties with renovation work repre-senting at least 25% of the price) has been an unquestionable success. The interest-free loan (PTZ) for older properties, for the period January to May 2016, represents approximately 20% of interest-free loans distributed (vs. 3% in the previous system).

It should not be forgotten that the high volumes seen to date are also the result of a catch-up effect, the consequence of 3 years of pro-nounced waiting.

Consequently, growth relays will need to be found if we want to maintain this level of transactions.

Today we are in a users' market, since investors have not yet started buying older properties again. A situation that is not helped by the threat of rent controls!

The challenge could be to get investors to return to a market that could offer them a yield and legal security. This involves rebalancing rela-tionships between owners and tenants. Since excessive protection of tenants literally freezes a large part of the rental stock.

We must also take care that the increased vol-umes do not result in a major increase in prices, as this would cancel out the increased volumes.

Since scarcity is the source of increased prices, we have to ensure the political means are fos-tered to free up land and enable the construction of new properties.

VARIATION IN INSEE AND NOTARY INDEXES*

* Changes in early indicators based on pre-contractsin mainland France: projection to the end of August 2016.

Older apartments

Olderhouses

Change 3 months* 0.8% 1.7%

LATEST TRENDS

* Three-month variation (seasonally corrected): between 4th quarter 2015 and 1st quarter 2016 One-year variation: between 1st quarter 2015 and 1st quarter 2016.

No. 32 - July 2016

(Base 100 in 1st quarter 2010)

OLDER PROPERTIES OLDER APARTMENTS OLDER HOUSES

3 months 1 year 3 months 1 year 3 months 1 year

Mainland France 0.5% 0.3% 0.0% -0.4% 0.9% 1.0%

Greater Paris 0.3% 0.2% -0.1% 0.0% 0.9% 0.6%

French Provinces 0.6% 0.4% 0.1% -0.9% 0.9% 1.0%

An ideal market?

(1) Stat Info report of 6 June 2016

Annual change in sale price less than -2%-2% to 2%More than 2%

Source: Property databases of Notaires de France(The prices for Greater Paris are valuations from the INSEE and Notary indexes for the 1st quarter of 2016)

MEDIAN SALE pRICE for OLDER HOUSES in the 1st qUARTER Of 2016

Trend over one year: 1 January 2016 to 31 March 2016 /1 January 2015 to 31 March 2015The statistics for houses concern the whole urban area (town centre + suburbs)

Rouen€159,500

2.9%

Reims€197,000

3.1%

Lille€175,000

2.6%

Brest€165,000

3.1%

Nantes€245,000

0.0%

Poitiers€158,000

11.3%

Bordeaux€265,000

6.0%

Angers€210,000

5.5%

Montauban€170,800

9.7%

Toulouse€268,000

4.4%Montpellier€313,200

9.9%

Marseille / Aix-en-Provence

€310,0003.3%

Orléans€184,500

1.3%

Toulon€342,000

-0.8%

Tours€200,000

0.0%

Chartres€190,400

5.8%

Lyon€294,600

-2.3%

Le Havre€160,000

0.9%

Grenoble€305,800

2.6%

Saint-Étienne€164,000

-12.5%

Metz€199,100

13.8%

Nancy€160,000

1.3%Troyes

€145,5005.5%

Réunion€208,000

12.9%

Châteauroux€95,000-15.9%

Greater Paris€289,000

0.6%

Caen€185,000

-2.1%

Dijon€213,600

12.4%

Limoges€465,300

9.5%

Amiens€145,000

-3.3%

No. 32 - July 2016

Nimes€195,000

-2.5%

Annual price change  per sq. m.

 less than -2%-2% to 2%More than 2%

Source: Property databases of Notaires de France (The prices for Greater Paris are valuations from the INSEE and Notary indexes for the 1st quarter of 2016)

MEDIAN pRICE pER Sq. M. for OLDER ApARTMENTS in the 1st qUARTER Of 2016

Strasbourg€2,290-3.3%Tours

€2,1002.1%

Saint-Étienne€870 -6.7%

Orléans€1,920

3.9%

Grenoble€2,120-4.9%

Clermont-Ferrand€1,730

7.7%Bordeaux€3,090-0.2%

Bayonne€2,340

1.2%Montpellier

€2,390-1.9%

Toulouse€2,480-0.8%

Nantes€2,500

0.6%Dijon

€1,880-0.1%

Lyon€3,350

3.5%Limoges€1,160

3.1%

Poitiers€1,440-7.3%

Rennes€2,270-2.1%

Caen€1,640-6.0%

Mulhouse€1,040-3.8%

Besançon€1,540-3.0%

Marseille€2,180-0.5%

Nice€3,450-0.7%

Réunion€2,120

1.3%

Toulon€2,030

1.6%

Corse-du-Sud€3,080

3.8%

Haute-Corse€2,290-3.4%

Reims€1,900

2.3%Nancy€1,710

0.5%

Metz€1,660

5.5%

Paris€8,000

1.2%

Lille€2,720-3.5%

Rouen€2,130-0.1%

Amiens€1,940

1.2%

Trend over one year: 1 January 2016 to 31 March 2016 /1 January 2015 to 31 March 2015

Nimes€1,340-9.9%

No. 32 - July 2016

What about Brexit?The United Kingdom's decision could have a positive impact on the other European property markets, especially with regards to offices, but it is far from certain that the French market will reap the benefits. No windfall effect can be anticipated at this stage.

At the most, in the housing market one can expect that British people will defer investments in France and some of those already living in France will sell off earlier than planned (phenomenon already seen during the 2008-2009 crisis).

The older property marketIndexesAccording to the INSEE and Notary indexes, in the first quarter of 2016, prices for older proper-ties increased for the third consecutive quarter in mainland France: +0.5% from the fourth quarter of 2015 (based on provisional data corrected for seasonal variations), after +0.2% the previous two quarters. For the first time since the beginning of 2012, older property prices increased year on year: +0.3% in comparison with the first quarter of 2015. This increase is due strictly to houses, whose prices increased 1% in comparison with the same quarter of the previous year. Apartment prices continued to fall year on year, but the drop slowed down again this quarter (-0.4%, after -1.1% and -2.0%)

In Greater Paris, prices of older properties increased slightly in the first quarter of 2016 (+0.3%) after a time of stability. Year on year, prices recovered slightly, after a period of continu-ous contraction since mid 2012. This slight upturn is due to houses, whose prices are recovering, while apartment prices remained stable.

In the French provinces, prices for older prop-erties are up for the third consecutive quarter. Year on year they also increased 0.4%. House prices continued their rise, while apartment prices continued to fall.

Median pricesThe analysis of median price trends in the French provinces shows contrasting situations between departments. Concerning houses, prices sta-bilised in 20% of the departments (13% last

500 000

550 000

600 000

650 000

700 000

750 000

800 000

850 000

900 000

Dec.

-00

May

-01

Oct

.-01

Mar.-0

2Au

g.-0

2Ja

n.-0

3June

-03

Nov

.-03

Apr.-

04Se

pt.-0

4Feb.

-05

July

-05

Dec.

-05

May

-06

Oct

.-06

Mar.-0

7Au

g.-0

7Ja

n.-0

8Ju

ne-0

8N

ov.-0

8Ap

r.-09

Sept

.-09

Feb.

-10

July

-10

Dec.

-10

May

-11

Oct

.-11

Mar.-1

2Au

g.-1

2Ja

n.-1

3Ju

ne-1

3N

ov.-1

3Ap

r.-14

Sept

.-14

Feb.

-15

July

.-15

Dec.

-15

Aug. 09 : 564 000

Feb. 13: 652 000

Feb. 15: 691 000

Apr. 16 : 830 000 Feb. 12: 834 000

The new housing market - Key figuresHousing construction Results at end of April 2016(extract from CGDD's Datalab Essentiel report No. 7 of June 2016)

Variation Q/Q-1 (*)

All Houses

Apartments(including blocks of

luxury flats)

Approved housing

-1.1% +10% -7.6%

Housing started

-4.5% -3.5% -5.1%

* Last three months compared with the previousthree months.

In cumulative raw data over twelve months, the number of properties approved for construction (402,900) increased 9.9% over the cumulative total for the previous twelve months.

Marketing of new properties Results in the 1st quarter of 2016(extract from report No. 768 of May 2016)

1st quarter 2016

Reservations+15.2% year on year

(28,600 units)

Offered for sale+18.8% year on year

(27,800 units)

The number of dwellings available for sale decreased to 97,800 at the end of the first quar-ter of 2016 (-4.5% in comparison with the first quarter of 2015).

LoansBanque de france data - April 2016

- Renegotiations: 31% of "new" mortgages(36% in January 2016)

- Mortgages outstanding:+3.2% year on year

Average interest rates: 2.10% (down from 2.33% in January 2016)

quarter). As a consequence, the number of departments recording higher prices decreased (44% in the 1st quarter of 2016 vs. 58% in the 4th quarter of 2015). In the apartment market, there was little change: one third of the departments recorded higher prices, 16% were stable and 45% recorded lower prices.

Concerning the main towns in the French prov-inces, the annual trends for older apartments remained mixed, whereas older house prices were mostly up or stable, like the previous quar-ter, with the notable exception of Lyon, which recorded a price fall of 2.3%, despite the fact that prices had started to climb in the previous quarter (+1.7% year on year).

pre-contractsThe projected price indexes at the end of August 2016, based on pre-contracts through-out mainland France, indicate a slight annual fall in apartment prices (-0.6%) and a slight increase in house prices (+0.3%).

In the French provinces, the early indicator for older apartments is down year on year (-1.8%). Houses are following the national trend with +0.4% year on year.

In Greater Paris, all of the early indicators foresee a slightly more bullish climate in the summer, related partially to the seasonal component. In Paris, the forecast price per square metre for older apartments for August 2016 is €8,180, a quarterly increase of 2.2%. The annual price variation in the French capital is also forecast at +2.2%, since prices held at around €8,000 throughout 2015 and the beginning of 2016.

Volumes (see graph below)

At the end of April 2016, the national sales vol-ume continued to grow. The number of older property transactions completed over the past twelve months is estimated at 830,000, up 19% year on year. Thus it returned to the levels seen before the 2008-2009 crisis. However, housing stock has increased 12.5% between 2005 and today. This means that there is still a shortage of approximately 100,000 transactions to return to a turnover rate similar to that during 2004-2007.

DefinitionsSeasonally corrected pricesIn the same way that the calculation of the indexes makes it possible to strip out structural effects, seasonal corrections are intended to adjust seasonal fluctuations. The purpose is to ensure a fair comparison of trends between two consecutive quarters, without this interpretation being distorted by the time of year. For example, property prices (particularly for houses) rise during the third quarter of each year, due to demand from families driven by the school year.

Median pricesThe INSEE and Notary indexes are available only for those geographical regions where the number of transactions is sufficiently high. At more detailed levels, median prices are used. The median price is the price at which 50% of transactions have been concluded at a lower price and 50% at a higher price. It more accurately represents the "midpoint" of the market than the average, as it is less affected by extreme values.

INSEE and Notary IndexesThe calculation method used for the INSEE and Notary indexes is based on econometric models which break down the price of a property according to its main characteristics (location, size, comfort, etc.) in order to be better able to withstand structural effects that cause transaction prices to vary from quarter to quarter.

Contact: Training and Development Department, High Council of French Notariat

Editorial committee: Didier Coiffard, Thierry Thomas, Christine Rey Du Boissieu, Caroline Gaffet, François Proost and Claude Taffin

Publication Director: Isabelle Mariano

Published by: Conseil supérieur du notariat 60, boulevard de La Tour-Maubourg - 75007 Paris Tel.: + 33 (0)1 44 90 30 00 - www.notaires.fr

Created by: Publi.not

Page layout, printing: Groupe Drouin Maître Imprimeur

+ 33 (0)4 73 26 44 50

ISSN: 2100-241X - Photo credits: Fotolia - Phovoir

No. 32 - July 2016

This is a little known area of their activity: notaries can negotiate property assets. This makes them professionals who work with their client from the planned sale through to publication of the authentic deed.

The High Council of French Notariat [Conseil supérieur du notariat] wanted to develop this area of expertise through a network, a joint website (immobilier.notaires.fr) and a single brand (immobilier.notaires®). This pro-vides easy access in digital format to all of the profession's tools related to property. The goal is to ensure that French people finally identify notaries as representatives for buying or selling their house or apartment.

The notary profession is relying on its comprehensive coverage of France and innovations such as immo-interactif®, an online sales room that can be used to sell your property to the highest bidder within 45 days with all the guarantees of a notarial service.

All of the services provided by the notary profession can be accessed at www.immobilier.notaires.fr.

Note that since 1 March 2016, a notarial property negotiation is no longer subject to a national fee schedule. The notary is free to set fees based on the type of property and the terms of the property listing, but remains governed by the profession's code of ethics.

The expenses payable during any property transfer remain subject to a regulated rate. They include, in particular, the duties and taxes payable to the State as well as the notary's remuneration for drawing up the authentic sales deed.

What are the advantages of using a notary?

A notary will bring you the benefit of knowledge of the local property market and access to notarial databases. This allows the notary to suggest a reliable estimate of the property's worth, thereby limiting the sales timeframe.

More generally, a notary will advise you on the legal aspects of the trans-action, in relation to your situation and your personal assets (sale of a jointly owned property, constitution of a non-trading property company [SCI], joint purchase by two or more persons, family donations to assist the financing, etc.).

To accelerate the sale, the notary may offer to organise an auction or to sell the property through Immo-Interactif, an online sales package offered by the notary profession.

Isn't it also simpler to have just one representative?

he notarial office will help the seller, when he or she decides to sell, to put together the sales file, which has become more onerous these past few years with the SRU and ALUR laws. The notary can conduct all verifications well in advance, to ensure the sales file is reliable and thus save time.

The notary will draft the pre-contract (preliminary contract of sale or provisional sales agreement) based on this verified sales file, which is not necessarily the case when sellers deal directly between private individuals.

Notarial property negotiation: real expertise