French housing bubble set to burst

French property construction plummeted 15.1pc in February and home prices have begun to slip in the first sign that America's housing woes are spreading to Europe.

French house prices have shot up by 210pc since 1995, compared with 190pc in the US, much to the delight of 180,000 Britons with second homes across La Manche. But after years of double-digit gains the pace slowed to 7.2pc last year and turned negative in January with a fall of 0.6pc.

"The market has turned in France, and this is the trailer for the movie we're are going to see across Europe this year," said Jean-Paul Six, chief Europe economist for Standard & Poor's.
"I think we will see falling house prices in France in coming months and that is going to cause headlines. It is the delayed effect of rising interests rates, which have already gone up seven times to 3.75pc, and are going up further.

Spain, Ireland, Scandinavia, Holland and Italy - as well as Britain - have all enjoyed housing booms, with much of Eastern Europe playing catch-up. The big exceptions have been Germany and Switzerland, where property has been flat for a decade.

I can tell you the effects are showing up here in Norway. Last year there were bidding wars for homes, this year the market has stalled with a lot of homes coming on the market and lackluster sales.

After a long visit to Spain last Spring I saw first hand the housing bubble there. I have to agree, it's probably the largest R/E bubble in the world. However news about the French housing market going negative is just starting to emerge and I will be watching it with interest.
Vern