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Edition 31 January 2017 - Crédit Agricole S.A.
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  • Edition 31 January 2017

    France – Housing Market: Recent developments and outlook for 2017-2018

    The housing market saw a marked recovery in both 2016 and 2015. The number of transactions rose by 5% in pre-owned and saw a further very sustained increase of 17% in new-build. Prices are picking up once more, although modestly, rising by 1.7% over 12 months in pre-owned in Q3 2016. However, this boom is not quite comparable to a traditional cyclical rebound, and features some weaknesses. In 2017-2018, we lean towards a scenario featuring a slight rise in 10-year OAT rates and lending rates, leading to a slowly declining trend on the market.

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  • Contents:

    - Recent trends in pre-owned and new-build
    - A very sustained market in 2016
    - 2017-2018: risk of a slight dip

  • Extract – Slight increase in lending rates

    In 2017-2018, the market's main driver will be the level of lending rates. The 10-year OAT rates began to edge up in late 2016 and are likely to rise gradually over the coming quarters, towards 1.1% at end-2017 and 1.5% at end-2018.
    This movement is related to three reasons: 1/ a "mechanical" increase in inflation rates in 2017-2018 in connection with the base effects driven by rising oil prices; 2/ the rise in US long-term rates, in connection with higher growth and inflation forecasts; 3/ a widening of the spread between OATs and Bunds, in the short term at least, due to uncertainties about the outcome of France's presidential and general elections.
    In view of all this, lending rates are likely to edge up over the coming quarters. The windfall effect could, therefore, ease off. Buyers will be in less of a hurry and more hesitant, since lending rates will no longer be on the floor, so that the real estate market could be slightly less upbeat.

  • Associative topics : Economics | France | Real Estate

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