I have noticed prices dropping by 7% since November on selected properties in my area, and others have stayed the same. Strange, when the price increase for Cote d'Azur properties in 2006 was 8% (according to figures from the French National Association of Estate Agents (FNAIM)). I asked myself "why?"

I first asked myself, "Who actually sets the prices for properties for sale here in the South of France?" Is it the owner, or the property agent who actually sets the price? If you ask most property agents in this area, it is the house owner who will set the price, based on either a rough idea of the market, or how much their neighbour sold their house for. French families, who have been passed down these houses as family heirlooms, are not looking to sell fast, as they have large extended families, all of whom have a part of the eventual sale. They probably do not need to sell immediately, so they can put a large price on the property and play the waiting game.

Some established agents will not touch these properties/property owners, but others in need of brochure/website material will. Estate agents in St Tropez in fact push up the property prices, as other owners of similar houses will want as much as them, and will not be happy with less, even if they have to give up on their present agent and move to another one. Remember there are 70+ estate agents in St Tropez' 10km2 village. So they have set the prices above the market price, in the hope that foreigners (usually Londoners) will love the property so much they will pay the price. Most of our houses are bought at 10% off the asking price; as many clients actually do want to sell. The number of sales in the first quarter of this year dropped by 2 per cent, even if the market rose 4 per cent over the entire year.

French Property Agents are trying to fight this, but this comes down to the exclusive/non-exclusive play-off. Property agents have a choice of an exclusive or non-exclusive mandate with the owner who wants to sell their property. You might think their ideal situation is to get an exclusive mandate with the owner. Why, because they are the only agent with the property. However, an exclusive mandate with an owner can be a real bind for the agent. They usually have to accept the price the owner gives them in return for this exclusivity. If they cannot then sell the property (usually within 6 months) then the owner may get fed up and take away the contract, then give it to numerous competing agencies on a non-exclusive basis. Many French estate agencies are now only going into non-exclusive deals, as there is a lot less pressure, and they can determine the prices. However, many agents still take what they can, and prices become inflated.

We have seen the market for French property in the third quarter of 2006 remain buoyant, with a marked increase in clients spending more money on their chosen property in the South of France, with many also taking the option to buy land to build their dream French property. Our agents have also noticed that the percentage of permanent movers to France, as opposed to buyers of holiday homes in France has dramatically increased in 2006. A potential permanent resident is more likely to buy at inflated prices to secure their dream home/life.

House prices are still relatively low compared to the rest of Western Europe and government measures are making French property investment more and more attractive. For the overseas buyer this is extremely attractive, as is the fact that some French lenders will now lend up to 100% to non-resident investors. This should have a knock-on effect and increase property values again in France over the next 5 years.

My advice is to come and rent in the South of France, and watch the market in your chosen area. It may take a good 6 months to clear the clouds and get a real picture of this inflated housing market. If you can't, use a reputable estate agent to guide you, and always make an offer below the asking price, as you never know whether the owner really wants to sell, or is just waiting to win property lotto.

###

Jetset Agency offer luxury rental villas in St Tropez
Rumble Romagnoli
optimize@relevanceweb.com
www.jetset-agency.com

http://luxuryvillassttropez.blogspot.com/
Luxury Villas South of France