In 2009, real estate prices no longer seemed to align with household incomes. This might have also been due to the end of easy mortgage credit. If before 2008 it was easier to obtain a mortgage, this was no longer the case in 2009. Specifically, since the beginning of the infamous subprime crisis, which had direct consequences on the global real estate market. However, it all depends on the bank you deal with; some grant loans more easily than others.
Many individuals also lost a lot of money in the stock market in 2008 and therefore no longer have the necessary capital to invest in real estate. Banks had to rework their margins and might not follow the European Central Bank’s (ECB) rate cuts. Indeed, that is what happened. Despite a slight decline in mortgage rates, the Credit Housing CSA Observatory, led by economist Michel Mouillart, states that the decline recorded since November 2008 remains the most significant in many years. “Such a drop had not been observed since spring 1993, but the rates were then at 10.74%” according to Michel Mouillart. In June 2009, an average of 4.14% was established for mortgage rates, and until December 2010, these rates are expected to increase, reaching an average of 4.50%.
“We need an adjustment”
Jean-Paul Pache, 55, an employee of the Foch real estate group and a connoisseur of the real estate industry on the French Riviera for 30 years, confides that real estate in Nice and on the French Riviera has seen a 30% decrease in 2009. A crisis of confidence has set in among individuals, leading to a decrease in real estate transactions. On the French Riviera, there are two types of clients. On the one hand, clients who want to invest their income in real estate. Most of the time these are civil servants, local workers who, with the aid of a bank loan, decide to save for the purchase of an apartment. This type of client remains regular, proof: “since Monday, I have signed purchase contracts with two young couples,” asserts Jean-Paul Pache. For him, the second category of client is defined by those who have capital to invest in real estate: “they want to buy a dream.” The majority of these clients come from regions where the climate is not as mild as on the French Riviera. These clients are not necessarily interested in the price per square meter. Unfortunately, it is these clients who tend to disappear; they prefer to wait for the stabilization of the economic market, currently in crisis. “The real estate market does not know the crisis, it just needs an adjustment,” according to Jean-Paul Pache. One of these adjustments is due to the lack of housing on the French Riviera. Another important detail is the modification of the standards and conditions in which apartments are sold. “An owner who offers a housing in poor condition, lacks respect for the clientele (…) I do not accept transactions of homes that do not meet the standards,” concludes the real estate agent.
“The crisis has confused clients in their investment choices”
Francesco Laborante, an employee of the Italian real estate agency Altitalia in Nice, tells us about the changes recorded in 2009 in the real estate market. “We are experiencing a 30% decrease in regular customers, I am talking about tourists, most of whom are no longer interested in investing in real estate at the moment.” The real estate market is experiencing a crisis, but in the sense that there are no quality homes to offer clients. The prices are too high compared to the average. Rental requests continue to increase, and the majority of clients who want to invest have less capital than in previous years. Thus, “many curious clients who come to the agency want to ask us if they could invest in a studio with a terrace and sea view, with a maximum budget of 200,000 euros,” which is very rare on the French Riviera. Regarding foreign clients, a new wave of potential buyers is represented by Scandinavians, who greatly appreciate the French Riviera. The English and Irish no longer allow themselves to invest as before in real estate, due to the exchange rate between the euro and the pound, which is no longer as profitable as before. The Russians, who represented a significant percentage of the clientele, have disappeared, with Italians remaining to a lesser extent.
In Nice, about a hundred real estate agencies are established in this market, which needs a revolutionary idea to restart the system. In the coming months, the government and banks should come to an agreement and find a solution to reduce credit rates, in order to gradually regularize the real estate market and restore confidence to potential clients. If this situation does not change, it will affect millions of professionals in the field, especially those who are commissioned and are forced to pay taxes, even if they record no sales.
