French house prices up again in the beginning of 2011
In 2011 Q1, housing prices in France are up but some deceleration seems to materialize.
Regarding local markets, Paris remained the most dynamic part of France with prices up by 5.6% QoQ for flats, after +5.7% QoQ in 2010 Q4. The very sharp upward trend over the mast quarter propelled the prices to +20.8% YoY. Areas close to Paris are also up, but at a more reasonable pace (+12.2% YoY for flats). Excluding the Paris region, prices stagnate in the beginning of 2011, notably for second-hand houses.
If we exclude the Paris (crazy) region, the French housing market is showing the first signs of stabilization. There are a lot of discussions, including among French public bodies, about the existence of a bubble. Valorisation for housing (Price-to-Income or Price-to-Rent) is reaching new historical highs, the affordability is down and household’s debt is growing rapidly (Debt-to-Income now close to 80% of GDI against 60% in the end of 2004).
We think that the trigger for a correction on prices would be the evolution of French 10Y yield (currently close to 3.5%). If it goes above 4%, the party will be over.