Property Value Concerns
The economic situation has had significant negative consequences to the property market. It is widely recognized that property markets in Spain and Ireland are tumbling and, in France, it has softened dramatically. But the French property market appears to be more stable, helped by factors like a prudent approach to credit and mortgages, less speculative buying and social and demographic factors.
Part of the reason for France’s seeming resilience is that the subprime crisis has left the French mortgage market less scathed, and the provision of credit has been tighter than in Britain or Ireland. Average French household debt was 47 percent of gross domestic product in the third quarter of 2007, compared with 59 percent for the Euro zone and 97 percent in Britain, according to Standard and Poor’s.
The other factor is that interest repayments are tightly regulated through instruments like the taux d’usure—an official ceiling set by the Bank of France for the rates that lenders can charge. Banks will generally not lend more than 33 percent of gross income. Mortgages of 100 percent do not exist and the majority of home loans—about 85 percent—are fixed rate. Variable rate loans come with caps, limiting repayment increases when rates rise.
The Housing Market
In France, the majority of people live in rented accommodations, and laws strictly control rent increases. Residential transaction volumes are down by 10 percent this year, and more houses are waiting for buyers. People have taken a wait-and-see position. People who need to move, don’t wait long to find a new house and thus don’t need storage. And there are now indications of people either downsizing or losing their homes in France. French homeowners worry about the value of their homes and that prices could fall.
Throughout Europe, soaring prices have had a dramatic impact on families’ purchasing power. In France, many in the middle class feel unfairly caught by this. Frustration with this is rising along with the prices as people try to reduce their expenses. Inflation is at a 17-year high.
The French self-storage industry experienced 20 percent less occupancy rates this year. Factors driving this include no household downsizing, an excess of available homes on the market, and the reduced purchasing power of the population.
So far, there is no evidence of facilities adjusting rates to the market, apart from some price reduction here and there. But there is a trend of small operators joining Homebox or Gess, the largest storage companies, to benefit from a national network. ISS
Philippe Peyrot is president of Annexx SAS, a French self-storage company, and founder of Self-Stockage.Info, an online publication about self-storage in Europe. For more information, visit www.annexx.com and www.self-stockage.info.