"The bust has been much less widespread than the boom. Home prices tumbled by 34% in America from 2006 to their low point earlier this year; in Ireland they plunged by an even more painful 45% from their peak in 2007; and prices have fallen by around 15% in Spain and Denmark. But in most other countries they have dipped by less than 10%, as in Britain and Italy. In some countries, such as Australia and Canada, prices wobbled but then surged to new highs. As a result, many property markets are still looking uncomfortably overvalued."
In the lofty realm of apartments in Paris that are valued at €2 million or higher—€2 million doesn’t buy all that much in Paris anymore—a game of chicken is apparently transpiring. The number of transactions crashed by 42% in 2012.Barnes, a British real estate group that specializes in high-end properties in France and certain tony locations elsewhere, based its study on data gleaned from lawyers (notaires) who engage in real estate transactions. Prices of high-end homes in Paris dropped by 10-15%. For properties under €2 million, transactions screeched lower by 28%, but prices remained stable.Optimism is hissing out of the French real estate bubble. For 2013, Barnes sees a market that remains “hesitant” during the first quarter of 2013, “with a low level of transactions,” that would gradually recover, somehow, with a “slow correction in prices”—rather than a sudden correction, or a crash even. Other industry insiders see darker clouds on the horizon.“Sellers still haven’t understood that they have to lower their asking prices drastically, even though prices in Paris have already fallen more than 10%,” said Philippe Chevalier, CEO of Emile Garcin, another high-end real estate outfit. He blamed foreign buyers, or rather the sudden scarcity thereof—foreign, because few French can still afford to buy a nice home in their capital. They’ve been effectively priced out of the market. But foreign buyers have gotten cold feet, he said, due to the “accumulation of tax pressures on real estate.”And not just in Paris. In the “provinces”—outside the metro area of Paris—sales of existing homes during the third quarter plummeted 20% year over year, accelerating from the 16% decline of the second quarter (PDF, released January 10). And new homes sales in France plunged 25% in the third quarter, a dizzying acceleration from the second quarter’s 14% decline.Yet, prices in France, at least in the third quarter last year, haven’t budged much to the downside as sellers are still clinging to the hope—proven illusory in every real-estate bust so far—that this too shall pass. And despite mortgage rates that averaged 3.31% in November over an average term of 208 months, home mortgage originations plunged 32.6% from prior year.
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