Does this sound familiar? The graph (click link) even looks the same. You could cross out France and write Australia here. Cross out austerity and write surplus.
France faces a property slump of Anglo-Saxon proportions as the frothiest boom in French history finally tips over, threatening the country with an economic shock just as austerity hits.
Paris has overtaken New York to become the world's third costliest city
By Ambrose Evans-Pritchard
7:22PM BST 03 May 2012
"It is a gigantic bubble, all the more dangerous as it is spread across France," said Pierre Sabatier, from the consultancy PrimeView.
"It reached a paroxysm in the summer of 2011. There is a mix of incredulity and denial as it starts to burst but there can be little doubt that all levers propelling the market are disappearing."
PrimeView said prices across France have jumped 160pc since 1998, though houshold incomes are up just 35pc. Paris has overtaken New York to become the world's third costliest city at €18,000 (£14,600) per square metre.
The boom seemed to defy global gravity last year as southern Europe and the US battled property slumps. The mood has since darkened. "A number of clients tell me they think the market has topped and want to get out," said one French hedge fund manager.
Standard & Poor's has told investors to brace for a 15pc correction. Credit Agricole says prices may fall 12pc by the end of next year, expecting a "gradual slide" that could last until 2016.
House prices versus disposable income in France
PrimeView thinks it will be much worse. The price-income ratio was stable from the 1960s to the late 1990s, before exploding over the past 12 years as a perfect storm of demographics, state sweetners and cheap credit led to a 12-year blow-off.
There are parallels with Spain and America but Mr Sabatier said the French twist is a replay of the early 1930s when investors fled stocks after 1929 and rotated into "safe" property. Hence the paradox of rising prices during the Depression. The strange boom did not end until premier Pierre Laval cut rent ceilings in 1935, triggering a long slide.
"Laval's policy change was the catalyst. The same could happen now as austerity forces brutal measures," he said. An array of market props are eroding, including tax relief on some mortages and certain capital gains.
The shift comes at a delicate moment. Banks are limiting credit as they scramble to meet Basel III lending rules.
PrimeView said deleveraging - which pushes up mortgage spreads - comes just as France's ageing crunch arrives. Those younger than 58 are net buyers of property, those older are net sellers. The buyers will stay constant at 33m, while the sellers rise by 1.2m every five years for a quarter century.
"Starting this year, the demographic structure will have a profound deflationary impact on property, reversing the last 40 years. We could see a vicious circle of falling prices," said Mr Sabatier.
"Ageing means the end of property's golden age. It may be less rapid than in the US because French households have less solvency problems, but we think a 40pc fall may be inevitable over five or 10 years."
A housing slump would hammer the economy just as long-delayed austerity begins in earnest. Property makes up 65pc of French household wealth, compared with 57pc in Germany, 39pc in Japan and 27pc in the US.
The risk is a "negative feedback loop" as all key levers of the economy turn contractionary. Any slippage in growth below the rosy forecasts of both candidates in Sunday's presidential elections, Francois Hollande and Nicolas Sarkozy, would play havoc with debt dynamics, pushing France above the danger line of 90pc of GDP.
"Whoever wins will receive a poisoned chalice. What France faces is like Japan: not a cardiac arrest, but slow growth for years," said Mr Sabatier.
I saw this also... the citadels of Europe are falling.
This will smash the French economy, the fact that the demographic situation is turning negative for the next 25 years is particularly telling esp given the French attitude to immigration.
This will smash the French economy, the fact that the demographic situation is turning negative for the next 25 years is particularly telling esp given the French attitude to immigration.
But how is it applicable to Australia? We have a rapidly growing population and policies are supportive of immigration.
NF, it's not the same but its not dissimilar. French may hate immigration but theres still plenty immigrants. British hate immigration yet in the 2000s it was boom time immigration wise.
Anyways, thats not the whole story. Sure immigrants need to live somewhere but they're way more flexible than the indigs.
The real issue in this story from France comes with the comparison with net sellers of property. This IS an issue in Aus. The demographics may be less severe than France but you only need to look around you to see the problem - theres lots of retirees coming over next number of year, retirees cant neg gear, and they need to crystallise their gains. Sure not all will do so at the same time, but the tide is coming in.
NF, it's not the same but its not dissimilar. French may hate immigration but theres still plenty immigrants. British hate immigration yet in the 2000s it was boom time immigration wise.
Anyways, thats not the whole story. Sure immigrants need to live somewhere but they're way more flexible than the indigs.
The real issue in this story from France comes with the comparison with net sellers of property. This IS an issue in Aus. The demographics may be less severe than France but you only need to look around you to see the problem - theres lots of retirees coming over next number of year, retirees cant neg gear, and they need to crystallise their gains. Sure not all will do so at the same time, but the tide is coming in.
I looked at property in France many years ago - Paris was dear in my opinion, but mainly due to the strength of the Euro.
I think that if our dollar remains above the USD then Australians could possibly buy well in France.
Any expressed market opinion is my own and is not to be taken as financial advice
Well, buy now at high prices and high AUD. Or buy in a few years at lower prices and lower AUD.
Lol - yes that's the choice. I haven't looked in years, but the French have a different philosophy to ours. If you looked in areas where UK tourists don't go then there will be some good buys. From what I can see it was the demand from UK residents that pushed prices up in Spain and France.
But UK migration is like a swarm of bees - they move into certain areas and leave others untouched. Then they convert that area to resemble the UK with a bit of quasi local flavour so that they think they are having a true international experience.
When you see the boxing kangaroo flag atop of the biggest house in some remote village in france - that will be my place. Drop in for a VB and have a real french experience - prawns on the BBQ and all.
Any expressed market opinion is my own and is not to be taken as financial advice
NF, it's not the same but its not dissimilar. French may hate immigration but theres still plenty immigrants. British hate immigration yet in the 2000s it was boom time immigration wise.
Anyways, thats not the whole story. Sure immigrants need to live somewhere but they're way more flexible than the indigs.
The real issue in this story from France comes with the comparison with net sellers of property. This IS an issue in Aus. The demographics may be less severe than France but you only need to look around you to see the problem - theres lots of retirees coming over next number of year, retirees cant neg gear, and they need to crystallise their gains. Sure not all will do so at the same time, but the tide is coming in.
Is this a joke? You cannot possible compare population and demographics between Oz and France.
The immigrants that come to Oz are mostly well educated Asians and Euros that become productive members of society, and eventually buy properties form their earnings. (I am one of these)
The immigrants coming into Europe, and France especially are almost exclusively illiterate Muslims from North africa who will never learn French or even get a job. Nor will their kids, or their grand kids.
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