The Price of Old Properties Are catching Up With The Price Of New Developments

10 years ago the price differential between a brand new apartment and an old one was usually 25%; the latter being the cheaper of the two. However, in the last few years these prices have been converging at an alarming rate so much so that now in Yvelines according to the Chambre of Notaires of Ille de France the difference in price between the two is now as little as tens of Euros compared with 17% two years ago! A representative of the developers Nexity who builds nearly 10,000 homes across France per year is quoted as saying that the gap between the two is now around 6%.

Michel Mouillart a professor at the University of Paris-X has studied this phenomenon very closely and commented that if these trends continued then the price of old buildings could soon overtake the price of new developments. He concluded that the worrying thing about this was that the prices in the long term will fall into balance with the difference returning to 25% once again, stinging anyone who has over-paid for an old apartment.

The advice given is to compare property prices in the same area and only buy an old apartment if the price is 25% below that of a new one in the same area. If the gap is smaller than this then the advice is to think hard about your purchase or negotiate.

But Will French property prices keep on rising?

French property prices over the last year until the month of October 2005 averaged an increase of 11.4% (Source FNAIM 2005). This is in contrast to the previous year which reached over 15% as a national average- so is the French housing market slowing down?

Figures show that in November 2005 the price of apartments rose by 0.3% while the price of houses by a more sturdy 1%, averaging out at 0.5% in total for the month. This has been the trend since January 2005 as apartments have increased in price by a slower rate than houses and seems to be re-adjusting to the much higher growth rates they were accustomed to from 2002 to 2004. Data shows that between 2002 and 2004 apartments rose by between 12% and 17.8% each year while houses by a more moderate 8.4% to 12.5% a year, hence the readjustment seems logical. Smart investing however is all about examining specific locations and not looking at a country as a whole. For instance statistics from FNAIM show that in 2005 prices in Bordeaux rose by 15%, Toulouse by 18% and Nantes by 22%- all on the west and South West coasts of France while Paris recorded just 6% growth in 2005 as it was the slowest mover. These price rises in the south-West look set to continue as percentage prices still haven't risen by nearly as much as they have in Paris and so still have plenty of room for strong growth. It is also interesting to note that these price rises have often been in the less sought after areas of cities such as Bordeaux, Lyon and Paris. "Capital" the French investment specialists have seen that in Bordeaux, the common areas of la Bastide prices are catching up with those in the sought after area of the "Rive gauche". So does this mean that you should be snapping up as much property as you can in the less prestigious areas of French cities? Probably not as it is quite normal that during boom periods less sought after property can increase in value very sharply and it is also true that they will also be the first to drop in value if the French economy stumbles upon hard times. The fact is that even in a slow housing market prestigious, well located properties will always sell whereas others may not and even though price rises now might persuade you to buy in a cheaper area, in the long term the price gap between the two is likely to revert back to normal.

Therefore the advice is to choose your location and property type wisely and find out about local property trends before your purchase and the rewards are there for the taking.

Nick Dowlatshahi is the French Property expert and Managing Director of Leapfrog Properties. Leapfrog Properties is a French Property Agency that specilaises in the sales of French Property in every region of France. leapfrog-properties.com