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.
“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.
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.”