The Dordogne Property Market in February 2010

A lot of Dordogne estate agents are talking up the market at the moment, so it's a good point to look at what's actually happening and why. To listen to some, you would think that queues had started, with wallets stuffed with euros falling from their pockets as buyers hurtle off their Ryanair planes. Although things are better than they were, the reality isn't quite like that.

The economic background

Let's look at the incontrovertible first. The whole of Europe is still in the throes of recovering from the most dramatic economic crisis to hit it for decades. The recovery is in progress, but it's slow. The UK has been particularly badly hit, and the pound is finding it difficult to rise against the euro, currently hovering around the level of 1.14 euros to the pound. UK banks are still reluctant to lend, aware that levels of personal borrowing have to be reduced before stability can return to the banking sector. There is considerable political uncertainty, with an election looming in May.

France overall has been coming out of recession slightly ahead of the UK. The French banks have not been so badly hit as the UK ones, and there is not the same difficulty with loans as there appears to be in the UK. The Dordogne, however, is in something of a special position. Local industries, initially unaffected by the global crisis, have in some instances been closed by foreign owners wishing to source production in countries with lower labour costs. Agricultural incomes continue to decline. Tourism remains an important source of income but has been adversely affected by reduced spending from the British.

Equally incontrovertible is the fact that, of foreign property-buyers, the English have been traditionally the most numerous, followed – some way behind – by the Dutch.

It doesn't take an Einstein to realise that none of this makes for a particularly buoyant property market. But let's have a look at things in a bit more detail.

The supply side

Over the past two years or so an enormous amount of Dordogne property has come onto the market. Much of it is still sitting there. French owners move less often than the British, and sales tend to occur because of one of the three "d"s – death, debt or divorce. A number of local British, more used to moving house every five years, have decided that, for family, health or economic reasons, they want to return to the UK. The result is a good supply of stock at all levels.

The demand side

The number of visitors to our website, and the enquiries received by email, is currently some 80 per cent above that of the same period last year. So the good news is that there is considerable revived interest.

After this the position is slightly different between UK and French buyers.

UK Buyers

Here buyers of Dordogne property have become more discriminating and demanding than before. First, the exchange rate has made them much more aggressive on price. We are seeing properties transfer at up to 25% below an asking price fixed before "the crash". This is partly because of the exchange rate, but also because of the excess of supply over demand.

Secondly, we have found that the appetite for major renovation has considerably reduced. The reason is straightforward. Building work by good local craftsmen has never been cheap, and has become considerably more expensive as a result of the increase in VAT from 5.5% to 19.6%. Add in the impact of the exchange rate and you can see that the cost of a major renovation is likely to result in capital expenditure that may not yield any return. To give a concrete example: a renovation that in 2005 would have cost 100,000 euros, or (at then rates) £70,000, will now cost 114,000 euros, or (at today's rates) £100,000. That is without factoring in any increase in the cost of labour or materials.

Thirdly, buyers have become used to a better quality of finish in the UK and will consequently be more demanding in what they see in renovated properties in France.

Fourthly, we have found that people are less keen to move to the Dordogne on a permanent basis than they were before. This may be transitional: but the impact of the exchange rate has hit most Dordogne expats extremely hard, and for the moment a lot of people who would formerly have thought of a permanent move to France are now sitting on their hands.

French buyers

The French market is different. Buyers of Dordogne property comprise (a) those with families who are relocating to the Dordogne for professional reasons; (b) those seeking a weekend or holiday home; and (c) those seeking to retire to the Dordogne – often returning to their roots.

The first category will inevitably be looking for houses close to schools. The second and third categories will look at properties in a different way from British buyers: less romantic in their approach, they will in our experience be keenly aware of energy costs and may look more closely at the state of electrics, heating and insulation than their British counterparts. At the risk of generalisation, they may be more likely to buy a recently-built house, knowing that it will be cheaper to maintain. They will in all cases drive a fairly hard bargain.

Summary

Where does this leave us? From the above I think we can draw a number of conclusions.

First, the good news: interest in Dordogne property is reviving, and the usual buying season – from Easter to the autumn – will almost certainly be better than last year.

Secondly, the not so good news: supply of Dordogne property exceeds demand, which means that prices have been forced down. In addition, buyers are more choosy, preferring the completely renovated property to the unrestored.

How does this affect you?

As we regularly point out, a fall in prices is not necessarily bad if it accompanies a weakening of sterling against the euro and you wish to repatriate your funds. If you bought a property in 2005 for 300,000 euros you paid £200,000 for it. To get your price back at current rates you could sell for 228,000 euros.

What is trickier is where the property you have has been poorly renovated or renovated below the standard people now require. In this case you may have to reduce further, or simply wait and see if the market improves.

We have no crystal ball to tell us what the future holds. The normal cyclical movement of the property market would imply an improvement, but there are so many uncertainties in the present case that we wouldn't be prepared to go out on a limb with a forecast.

The real solution, if you're unable to achieve a sale of your Dordogne home and don't want to undertake further improvements, is to make the most of it and enjoy the wonderful lifestyle of the region. That was, after all, the reason you came here in the first place!


Antony Mair
MCM Dordogne Property
3 place du Général de Gaulle
24600 Ribérac