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EU 28 Country Reports
France
By Emmanuel Ducasse, Crédit Foncier Immobilier
Macroeconomic Overview
French GDP rose by only 1.1%, after 0.2% in 2014, and was not enough to reduce
the unemployment rate which at 10% in 2015 had virtually not moved from
9.9% in 2014. Furthermore, the public deficit did not improve either, hovering
around 3.9% of GDP However this was principally driven by exceptional, exogenous circumstances (oil, euro, interest rates). The oil price drop in particular
significantly increased household purchasing power (1.4%, making a 0.8 point
contribution to the 1.1% GDP growth).
The absence of inflation did not initiate any wait-and-see attitude, despite the
mechanical rising of the savings rate (15.3% vs. 15.1% in 2014). Exports could
partially benefit from the revitalisation of intra-euro area trade, and from a
weaker euro.
However, signs of strengthening of supply to support a self-sustained recovery
were still lacking. Hence, productive investment grew slowly (1.9%, the same
as in 2014, making only a 0.2% contribution to the 1.1% GDP growth), despite
a higher margin for companies as a result of lower social security charges (but
at the expense of a tax increase for households), and of a decrease in costs
relating to oil.
Household investment fell less than in 2014. Similarly, employment in the merchant
sector remained sluggish and the number of unemployed continued to rise (3.57
million people by the end of the year).
Housing and Mortgage Markets
Housing market
The dynamics that took hold in late 2014 continued throughout 2015. Government
incentives, favourable financing conditions and a more favourable macroeconomic
environment underpinned the market.
Real estate loan interest rates rose slightly in the summer, but remained at record low levels throughout the year. As a result, given the high level of new loan
production, 2015 has proved to be a very good year for the real estate market.
Business picked up sharply in the new property segment in 2015.
The first sign of this recovery was the improvement in property developer sales,
mainly due to renewed interest from investors who welcomed the new tax incentives for buy-to-let investments known as the Pinel scheme. Sales of homes over
the year stood at 102,500 units, up 17.9% compared with 2014. This increase
in buyers also reduced the number of homes available for sale, which declined
by 6.1% over the year.
The second sign was the gradual increase in the number of building permits
and housing starts due to the sharp improvement in new housing sales. In the
property development market, the number of permits issued in 2015 was up
2.9% compared with the previous year, and stood at 387,100 units. Housing
starts over the same period rose by 2.1% to 350,800 units.
Builders continued their efforts to limit the additional costs arising from new
construction standards. Sales prices rose by 1% to 1.4% in 2015. Thus, average apartment prices stood at EUR 3,890/m², compared with EUR 3,852/m²
a year earlier.
The improvement in the real estate market was therefore more evident in sales
of individual homes, which were up by 13% y-o-y at the end of December 2015.
Existing property sales also improved in 2015 and at the end of 2015, the number
of transactions stood at 803,000 units, an increase of 15.7% compared with
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2016 EMF HYPOSTAT
the previous year. The fall in the number of transactions that began in mid-2014
finally ended in summer 2015.
This recovery was also due to the decline in prices. In Ile-de-France, apartment
prices were down by 1.1%, while for individual homes the decrease amounted to
0.5%. In the rest of the country, the drop was similar: 1.1% for apartments, but
individual homes recorded a 0.3% increase. However, according to provisional figures
of the Insee-Notaires de France index, prices stopped falling in the third quarter of
2015, and fell again by 0.5% in the fourth quarter, compared with the previous year.
Mortgage markets
The real estate lending market was very active in 2015 since home loan interest
rates remained very low, at an average of 2.2% .
Low interest rates make it easier for young people and low-income families to
purchase their first home. The government met its objective of facilitating firsttime home ownership, in particular for young peoples. 79% of borrowers that took
an interest-free loan since the start of the year were under 40. The proportion
of young people among first-time home buyers is rising steadily. Thus, buyers
under 40 currently account for 61% of new home buyers.
The interest-free loan proved particularly successful for the purchase of new
properties and only an insignificant portion of these loans was granted for
existing homes.
Loan production increased sharply throughout the year. Over one year to the end
of December 2015, loan production amounted to EUR 156 billion, an increase
of 30% . This exceptional level of activity was also due to the rise in loan renegotiations throughout the year, totalling EUR 76 billion in 2015, encouraged by
extremely low interest rates and intense competition between lenders.
Mortgage Funding
Deposits
The total amount of sight deposits in French banks (all actors) reached EUR 711.8 billion at the end of 2015, against EUR 626.6 billion in 2014, that is a 13,6% y-o-y
growth (vs a 7.9% growth between 2013 and 2014). Thus, household demand
deposits rose by 10.56%, from EUR 291.9 billion to EUR 322.7 billion.
As for savings accounts (passbooks + purchase savings plans), outstanding
funds remained almost stable at the end of 2015, from EUR 789.1 billion to EUR
802.2 billion in a year (a 1.65% increase).
Covered bonds
Despite an uncertain economic environment, covered bonds are still a safer and
more secure source of funding for European credit institutions than non-privileged
resources and other types of secured debt.
A total of EUR 44.9 billion in euro benchmark covered bonds was issued in 2015,
which nearly doubled the issuance of 2014. Net supply of covered bonds (difference between issuances and redemptions) remained nearly unchanged with
outstanding euro denominated covered bonds ranging around EUR 303 billion.
In France, Compagnie de Financement Foncier’s activity remained very strong
in 2015, with total issuance amounting to EUR 7 billion (excluding buy-back
and intra-group placements), an increase of EUR 0.9 billion on 2014. Public
issuance totalled EUR 6.4 billion in 2015, compared with EUR 4.6 billion in
2014, and private placements stood at EUR 2 billion (including EUR 0.8 billion
in intra-group placements and EUR 0.6 billion in buy-back) in 2015, compared
with EUR 1.5 billion in 2014.
EU 28 Country Reports
France
2014
Real GDP growth (%) (1)
Unemployment Rate (LSF),
annual average (%) (1)
HICP inflation (%) (1)
France
2015
EU 28
2015
0.6
1.3
2.0
10.3
10.4
9.4
0.6
0.1
0.0
Outstanding Residential Loans
(mn EUR) (2)
922,600
949,900
7,040,807
Outstanding Residential Loans
per capita over 18 (EUR) (2)
17,998
18,400
17,047
Outstanding Residential Loans
to disposable income ratio (%) (2)
66.4
67.5
n/a
Gross residential lending,
annual growth (%) (2)
1.1
14.8
n/a
Typical mortgage rate,
annual average (%) (2)
2.7
2.1
2.8*
Owner occupation rate (%) (1)
65.0
n/a
n/a**
Nominal house price growth (%) (2)
-2.6
-0.3
3.6
* Please note that this value is the simple average of the typical interest rate of the
EU 28 countries.
Typical LTV ratio on residential
mortgage loans:
In the first quarter of 2016, loans accounted for 79% of the average cost of
the operation, as regards the existing
housing market, and for 83% of the average cost as for the new housing market.
Any distinction made between
residential and non-residential
loans:
French banking regulations require a
distinction depending on the purpose
of the loan. Thus, applicable conditions
differ for every kind of financed asset.
Most common mortgage
product(s):
The most commonly seen loan is a
fixed-rate one. In the first quarter of
2016, 99.6% of the new credits were
fixed-rate loans.
Typical maturity of a mortgage:
In the first months of 2016, the average
term of real estate loans was 212 months,
which is 17 years and 6 months.
Most common way to fund
mortgage lending:
The two main sources of funding real estate lending in France are the households’
and companies’ deposits, which may be
term deposits or on book ones, and bonds
on the other hand. Securitisation of loans
remains marginal in France.
Level of costs associated with a
house purchase:
In France, the purchase costs depend
on the new or existing nature of the
purchased house: between 7% and 10%
for an existing one (these costs including
transfer duties and agency fees); about
2% for a new house (transfer duties
only), plus VAT (20%).
** Please note that for the EU this data has a one year lag. For the latest available
data please refer to statistical table 10.
Sources:
(1) Eurostat
(2) European Mortgage Federation - Hypostat 2016, Statistical Tables.
As regards new housing, the development fees and the VAT may be affected
by standard abatement.
France Fact Table
Entities which can issue mortgage
loans:
The level (if any) of government
subsidies for house purchases:
In 2015, a total of 404 credit institutions (including banks, mutual banks,
municipal credit banks and special
credit institutions) benefited from an
agreement delivered by the French
supervisory authority (ACPR).
Furthermore, the first-time buyer may
benefit from a zero-percent loan (supplemented by the government), which
can cover up to 30% of the global cost
of the operation, depending on:
• the area (four areas are defined by law,
according to the local real estate market situation: more or less stretched),
• the household composition and income.
The three main categories of credit
institutions, involved in property lending,
are in France:
The market share of the mortgage
issuances:
• Full service banks, whose market
share increased in 2015 (40.1% vs
37.3% in 2014)
• Mutual and cooperative banks, with a
lightly declining market share (54.5%
vs 56.4% in 2014)
• Specialised institutions, which experimented a light decline of their position
(5.4% vs 6.2% in 2014).
Proportion of outstanding mortgage
loans of the mortgage issuances:
Since the French market is mostly based
on guaranteed loans, we did not find
in government data reliable statistics
related with the outstanding mortgage
loans allocation between the three
categories of banks, as stated above.
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