When looking at the evolution of property prices in France and Spain since 2000 it becomes clear just how much Spain’s real estate sector has suffered in comparison to those in other countries.
An article at Perpe.es compares house price changes in Spain and France since the year 2000. Both countries saw incredible growth in housing prices of around 75% until the crisis took hold in 2008 and began to affect the property sector. But while France’s market has since stagnated and undergone minor price corrections, Spain’s property prices have continued to plummet with no let up yet in sight.
Peak to present house prices in France have dropped 6%, the fall in Spanish prices has been over 5 times as much at 34%. Part of the reason for this has been buyers continuing to invest in France due to its status as a safe haven, evidence of this can be seen in Paris real estate prices that are currently at 8,260 euros/m2, very close to their historical maximum of 8,440 euros/m2.
There was also never such a glut of new housing built in France as there was in Spain, even during the boom years (housing starts in Spain exploded in the boom, as illustrated in the chart below). This unsold stock has now become the bane of the Spanish property sector, as the simple economic rule of supply and demand has become a key factor driving down prices.
Although property prices in France have been falling during the last 2 years as well as unemployment having reached its highest level since 1998 it is not expected that the French could see a price decline anywhere near as catastrophic as Spain’s.