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Inside the Market / Market Trends

Will the French Presidential Election Mean Fewer Property Sales in 2017?

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In general and worldwide, real estate markets are considerably affected by political climate. What effect the presidential elections have on French property prices was the subject of a recent study by Le Credit Foncier, France’s national mortgage bank. 

The study concluded that in each election year since the early 70s, with the exception of 2002, the volume of real estate transactions in France has dropped an average of 3.8%. The average pickup the year before is 4.6%, and the year after sees an average 2.3% jump. The months leading up to the election can be particularly quiet, as anxious sellers await the outcome.

The reasons for poor market performance during an election year are wide-ranging. Political uncertainty can raise concerns for both buyers and sellers. Additionally, energy and resources are diverted to the election, leading to reduced activity on the property market.

In 2012, when Hollande replaced Sarkozy, French property transaction volume fell a massive 11.6%. That year also coincided with the Eurozone crisis. But, despite the economic turmoil and anxieties, the years either side still saw small increases.

Credit Foncier predicts that this calendar year will end with a total of 840,000 sales. Next year? Only 810,000. That would mean a reduction of tens or even hundreds of billions of Euros’ worth of transactions – and taxes. But 2017 may also defy the trend. Interest rates at an all-time low and the specter of a “hard Brexit” that takes Britain entirely out of the European Union’s single market, are giving some hope that France could gain foreign property investment that the UK is set to lose.

Paris real estate agents seem to have heard the news about decreasing volumes. In a survey by French polling organization CSA of 400 Paris agents, 53% expected next year’s election to have a “strongly negative effect” on their commercial activities; 32% believe there will be no effect at all. An optimistic 9% of those polled believed the volume of transactions will increase.

For some, the presidential election isn’t even the most significant event. Rather, the prospect of a new city mayor will be most important, and will be a boost to real estate activity.  The reasoning? A new candidate comes in, bringing with them positive energy that in turn helps business and consumer confidence; re-elected mayors are complacent and do less to help the market. This theory is more of a common adage than a well-researched hypothesis. We’ll have to wait until next year to see how both theories play out.

image © wikicommons

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