The Governor of the Bank of England, Mervyn King, yesterday announced that UK inflation is set to worsen. He almost seemed shocked by the gravity of his words in admitting that the outlook for UK inflation has "deteriorated markedly."

Consumer inflation is at its highest in 13 months as a result of higher food and energy prices.

These external factors, of course, affect economies globally but Mr. King says, about the UK specifically, that as a result "the central projection is for growth to slow sharply in the near term".

He said that house prices will fall further.

If UK interest rates stay as they are it could very well mean recession.

And with regard to the credit crunch and lending he says "It will take time to rebuild that sense of confidence in the banking system and during that period credit conditions will be more difficult than they would normally be," he said.

"I think the events of the last six to nine months are not ones that people will forget in a hurry."

Analysts' most optimistic 12 month exchange rate forecast is 1.3.

Figures released yesterday show better than expected growth in the French economy. Today, in Paris, Veronique Tison reported "The French economy recorded a first quarter growth estimated at 0.6%, better than expected, and the figure for the whole of 2007 was revised to 2.2% instead of 1.9%, announces the INSEE.

These "two very good news", in the words of Minister for the Economy Christine Lagarde, reinforce the government forecast of growth between 1.7% and 2.0% over the whole of 2008."

Inflation went from 2.8% to 3% in the first quarter.

In an article earlier this week on the respected capital.fr, there was good news about french interest rates.

It said, "Interest rates are generally stable, the average rate hovered around 4.67% in 1st quarter 2008 and 4.64% in April 2008, the same level as in December 2007.

In addition, the Observatory noted a reduction in the duration of debt, which amounted to 224 months for the 1st quarter of 2008 and 222 months in April 2008 a little over 18 years.

Other good news, buying real estate had a slightly smaller impact on household solvency. Its cost was 3.80 years of income in the 1st quarter of 2008 against 3.92 in Q4 2007."

The French housing market hasn't bottomed out, you're right. FNAIM and other industry expects say it won't either.

However, UK agents will have an increasingly difficult time in 2008 in a market where the Bank of England has assured us house prices wil fall and goes on to say "we just don't know by how much".

This poses another problem for owners trying to sell in the UK.

In the last nine months, largely thanks to the credit crunch, it has taken longer to sell their properties.

The Bank of England have now given up all hope on the expected rebound in 2009.

However long it has taken to free up equity by liquidating assets in property and businesses, we now have a guarantee from

Mr.King that it will take a lot longer over the coming 18 months at least.

There is, of course, the "do nothing" option as you suggest.

A progressively weakening pound, rising price inflation, falling house prices etc., all mean that those considering a move abroad who choose not to transfer their assets into euros now will lose out.

Yesterday's anouncements on the UK economy were as crystal clear as we'll get. We know now that there is no point in waiting to see what will happen in the coming months.

Even if people decide that France isn't where they want to invest, it's probably not a great idea to leave everything they town in the UK.

Traditionally, France has never been a country that people invested in with the express intention of making vast returns.

This is how France differs in one respect to emerging markets.

The speculators have all but disappeared.

Buying property in France is a lifestyle decision for the vast majority of people.

The returns are a welcome side effect.

__________________
Gerry O'NEILL
http://www.premierfrenchproperty.com
Mobile: +33 6 31 44 32 97 Office: +33 5 53 22 53 80

I just read your very interesting post on french prices falling. You make the correct assumption that its a lifestyle choice not an investment choice. I would be very concerned for the large number of leaseback properties on the market and the perception that they will give good returns. Having attended several "shows" in Dublin I decided a couple of years ago that they were not for me. I went the route of buying a new build in the final stage of completion and as such had only 5 months to wait until I collected the keys. With reduced Notair fees and a two year stay on our local taxes, I was very pleased we chose a new build. We had considered an off plan new build in a town close to us now but I recently visited this development of 14 houses and while the services are in and it appears that 5-6 plots are sold, nothing has started. We will have our second summer in our house this year. How different would our experience be if we had opted for this development. Every time I return to France I check the immobillier's windows and am surprised at seeing the same properties still for sale. I was offered , recently , what I thought was a very good investment. It is a 2 bed apartment on the first floor with a third floor for development into the same, the location is a period house on the main square in Limoux. It really is a beautiful location but further investigation, showed that it has been on the market a long while and asking price was €150k.At €75 per apartment I thought that it would make a great rental investment but it appears that the market is not so sure yet. A location like this in Dublin would need a zero added on. I will continue to watch the space and see what happens.
I do think that the Sterling / Euro problem might mean that you could see an increase in Irish interest in France at the expense of UK buyers. Perhaps sellers should target that market now.
Dave

Glad you found the post interesting, Dave. Although sterling climbed to a three week high against the euro today, as I say in my previous post, analysts don't foresee it going beyond 1.3 to the pound this year.

As an agency, we consider ourselves more fortunate than some others in that about 60% of our clients come from the eurozone.

We have never really focussed in earnest on the Irish market although we had a small number of Irish clients last year.

This year we thought we would invest some of our marketing budget in Ireland. Then, news came of a severe cooling in the Irish housing market.

What effect do you think the slowdown in the Irish market has had on overseas investment, if any?

Any hints or tips on the best places to market french property in Ireland specifically or do you think that people looking for property for sale in the Dordogne, for example, are more likely to use the popular UK based online property portals?

__________________
Gerry O'NEILL
http://www.premierfrenchproperty.com
Mobile: +33 6 31 44 32 97 Office: +33 5 53 22 53 80

Hi Gerry,
With a name like O'Neill I thought you would be more in tune with the "Irish mentality" . The "old enemy" attitude is very much alive and well in Ireland and I think reflects itself in the way Irish people purchase in France. As to Irish using the " popular UK based online property portals", in my experience of flying over to France from Dublin and talking to the, what appears to be, hoards of Irish property owners and prospective, it is more possible to be by word of mouth and personal recommendation.
I have been on holiday in France for over 20 years. Being a teacher married to a teacher, We have had up to 7-8 weeks every year to explore France. I do not think that there is a town south of Le Harve that we have not visited at some time. We picked our region having spent the last five years in the Dordogne. We wanted somewhere that was a bit cooler in the summer and the possibility of skiing in winter. So we ended up near Limoux.
Lots of people ask me to recommend somewhere in France and it is fairly easy if you know where in Ireland they come from. Donegal to Cork along the coast will be looking at coastal Atlantic areas. Midlands will look to the Centre, Limousin, Dordogne and the Lot. Young couples with kids who want holiday homes will tend to Bretagne, Vendée to the Landes. Older couples who want a place to retire in summer will look to the Languedoc. I am amazed at the number of Irish I have talked to that have used the hinterland of the "Ryanair" bases as a choice for their property. At the moment there is great interest in the Rugby playing regions south of Toulouse. Lots of Irish clubs are arranging visits to the south for games. Lots of potential clients, if approached properly!
You are correct in saying that there is a slow down in the Irish market in housing but I feel that this is reflected in the poor value that is to be found in Ireland when compared to France. There is still a lot of cash floating about, just not into Irish property. My own town, about 100km north of Dublin has 3 bed detached for €370+. You can get a small 3 bed mid terrace house for €250. When you compare this with France, there is no contest. Irish investors still have the cash to invest but home is not good at the moment. The prices are adjusting down up to 10% but still it is not enough to attract investors.
I last flew to France about 4 weeks ago and was talking to 4 couples from Munster heading out to check out the property. They were there looking due to the dreadful summer last year in Ireland. They wanted something more dependable, weather wise. They also wanted to see something and not an "off plan" type. I think that thios is the way to go as lots of Irish investors have been and will be badly burned in trying to offload Bulgarian and Turkish property. I personally know two local builders who, when the building boom was at its height here , headed off the Bulgaria and lots of locals have bought there as an investment. Trouble is with all the buildings coming on stream mid 2008 to mid 2009, there will be an almighty glut of properties. Getting to Bulgaria and Turkey is a major problem from Ireland. Flights are mainly charter and I know of one person who had to book a "holiday" with accommodation to get to his own place. I mention this as it is key that prospective buyers can get to their property on low cost airlines. Thus "Ryanair" destinations are going to be sought after.
We also have the additional problem that getting off the island is VERY VERY expensive. This year we will be sailing from Rosslare to Cherbourge and we got a reasonable price for two and car.....€980!!! Most southern Irish will not travel through England as the time taken to do so will knock up to four days off a typical two week holiday.
Sorry for the long winded reply but it might help.
Dave

These last exchanges have been interesting and quite represent for me what a property forum should be all about.
However there is a concept here which has been floating about which everybody here seems to grasp well - except me!
Would any of you be so kind as to take a minute or two to explain what "leaseback" is exactly and, if possible, suggest what the equivalent in the French language might be...?

Cheers, Neustria

Hi,
I took this piece from the website of frenchtree.com. I think it is a fair explanation of leaseback. I am sorry I do not know the french term for them. There are very simple reasons I do not consider them suitable for myself. Mainly , I wanted a home there. I also wanted to go to my house when I wanted and not pre booked a year in advance. I am not very sure of the guaranteed rental return. I feel that it might not be possible to pay out due to lower occupancy that quoted. The fact that it is for 9 years, for me a long time. I also would like to get first hand information on the resale problems within that period. And finally I think that the property will always be classified as "Maison du vacances" and not suitable for long term residence or retirement.
Dave

Leaseback – what’s in it for the buyer? from FrenchEntrée.com

French translation = cession-bail

Thanks Dave, very useful. There are quite a few things in there to think about.

__________________
Gerry O'NEILL
http://www.premierfrenchproperty.com
Mobile: +33 6 31 44 32 97 Office: +33 5 53 22 53 80

To Gerry O'NEILL and Dave re leaseback/credit-bail
************************************************** ************
Thank you both. The referenced article was very complete and answered my question fully. I had heard of such systems but out of hand had dismissed them as entailing too many drawbacks.

Also I was quite amused by the phrase:

"On average a yield ranging from 2.5 per cent to 5 per cent,
guaranteed income normally paid once a year ... "

2.5% being one thing and 5% quite another!!! In my meager experience I would surmise that the companies which guarantee the higher figure are also those which stand up less well under scutiny.

As you said, nine years is a long time! Look no further!

Neustria

"Although sterling climbed to a three week high against the euro today...analysts don't foresee it going beyond 1.3 to the pound this year."
(Premier French Property) posted on May 30, 2008
************************************************** ************

What is three weeks when you are investing for the long term in Real Estate?

In fact, year on year as of today, the pound has lost -17.24% of its value against the euro:
On July 2, 2007, one euro cost 67.46 pence. Today the same euro will cost you 79.09 pence.

These are interbank rates. The UK based investor would also have had to pay commission on the exchange for a real estate purchase, although the proportion of the relative pound depreciation over one year would still be roughly the same as the figure given above (-17% +).

With the benefit of hindsight, assuming that a purchase had been paid for in France 12 months ago, the gain by the euro's appreciation should have more than offset the loss caused the the drop in the prices of property, with a hypothetical gain of maybe about 10% over the year, depending on where the property was located. In an area like the Poitou-Charentes, the problem would now be to find the rare buyer for your holdings at even today's lower prices. He who had invested in the more solid markets of the Cote d'Azur or Paris would be better off.

This analysis underlies the importance of currency fluctuations when making your decision. A continental investor now looking to buy into the dropping British market would have the double advantage of cheaper prices and a strong currency.

The current situation certainly does not favour the UK based investor in France, given the continued weakness of sterling, especially since real property prices are falling and the fall seems to be accelerating.

One thing that I do believe is that the current rate of inflation could, in the long term, be favorable for the patient investor, because real estate prices do traditionally tend to keep pace with local currency depreciation - even if, at the present time, there appears to be no sign of this quite yet.

Finally, if you want some bad advice, just go ask an "expert"!

One month after the post above, the pound had already slid below the 1,30 euro per pound level which the analysts anticipated at year end. It currently stands at 1.265, whereas a year ago, it took 1.485 euros to buy a pound.

FXHistory - Historical Currency Exchange Rates

Hi birdy,

As you probably already know your worst fears might have come true in the meantime. Since the global property bubble burst, France has gotten its own fair share of market loss.

I think we will see further losses over the next few months for sure. having looked at various markets throughout Europe in the past few months I see a common show of chain reaction.

Are there any of you who see this in a similar way? I'd love to get some feedback.

Thanks
Monika

__________________
We've Done The Work For You
Find Germany Property Fast
Germany Venture