Housing: The INSEE rejects the idea of a bubble

Contrary to the Centre for Strategic Analysis, the French Institute for Statistics says the price rise is down to the lack of accommodation and not down to speculation.

On Tuesday the general manager of the INSEE, Jean Philippe Cotis explained that the surge in housing prices in France over the last few years seems predominantly linked to the lack of offer rather than to financial speculation, unlike the situation in Anglo- Saxon countries or Spain.

This opinion of the National Institute for Statistics is very different to that of the Centre for Strategic Analysis who announced some days ago the creation of a property “bubble” in France which is likely to go down to terrible effect.

According to a new study called « prices and rents of old properties between 2000 and 2010 » published on Tuesday by the INSEE, old property prices in France had increased by 141% over the period 1998-2010, that is to say 3 times faster than incomes (+43%). At the same time, controlled rents were increasing by 33%, that is to say an average of 2.4% per year, a rate higher than inflation.

No excessive investments

Thus, the property price curve in France had a relatively similar course to the United States until 2007. And in 2009, whereas old property prices were decreasing sharply over in the US to reach a level quasi equal to the one at the beginning of the noughties, the correction in France has been limited (-7% in 2009) and prices quickly went up again (+6.3% in 2010), as well as the volume of transactions, practically back to its level pre- crisis. However, there is no investment surge and French property prices do not result from an excess of investment in housing which could have justified the property price rise as in Anglo- Saxon countries and Spain.

According to statistics of the FPI (Federation des Promoteurs Immobiliers) property put on sale in France decreased by 11% in the first quarter compared to the same period of the previous year.

Housing weight more and more on budget

According to the INSEE, because of the explosion in property prices which increased much faster than their incomes, the French are dedicating more and more their budget to housing. And according to a study called “Being cold or spending too much money to warm oneself up” published in 2008, 3.8 million households (14% in total) are in a situation of “energy precariousness” because they dedicate more than 10% of their income to pay their energy bills in order to have heating and electric lightning.

30% of French people have to reimburse a mortgage. In seven cases out of ten, the mortgage is used to buy a main home or another property and in other cases, it is used to finance renovation works.

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