Opportunities in the French Housing Sector, 2007-2008
Like most of Europe, France has benefited from a housing boom over the last decade with prices rising particularly in major cities at double the rate of inflation. Today, some 15 million French people own their own homes, giving an ownership ratio of 56.7%. While this has increased by 4 percentage points over the last 20 years, it is still one of the lowest home ownership rates in Europe: some 71% of Brits own their own home while the highest ratio is in Spain at 84%. France’s relatively low rate is largely due to the lack of fiscal incentives for home ownership. But the new Sarkozy government has made wide-scale home ownership a major priority.
As of June 2007, home owners can offset their mortgage repayments against income tax up to a maximum of €1,500 per couple—a measure that is widespread throughout most of Europe, notably in the UK but is new to France. In addition, wealth tax and inheritance tax have both been modified to encourage home ownership and the ability to pass on primary residences to one’s children. While the policy should give an immediate boost to consumption, the longer term effect will be to encourage the French to invest more in their homes and to gradually raise the rate of home ownership.
Like most of Europe and the US, France is currently experiencing a slowdown in new housing starts. The DIY market, however, remains buoyant, increasing by an average of 3.5% every year for the last decade. 2006 saw DIY activity rise by 5.2% to reach €20.14Bn with an additional €5.9Bn spent on gardening. This puts France in third position in Europe but significantly ahead of the number 4.
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