The Dordogne Property Market – June 2010

The long lean period for Dordogne property – and indeed for property in the adjacent area of the south Charente - shows no real sign of easing. In February this year I informed our clients that prices had dropped by some 25% over the past two years. A recent article in the Sud-Ouest was of the same view – except that the figure quoted for country properties – in the Sarlat area at any rate - was 30%. British buyers, who formerly accounted for 25% of purchases of character property, now amount barely to 10%. Since the volume of transactions has declined by 50%, this indicates that the number of British buyers has declined by 80%.

The exchange rate and UK buyers

Contrary to what many may think, the glorious days when the pound was close to €1.50 were back in 2007. In June 2008 it was at €1.26, and a year later at €1.18 – not a mile away from the present rate of around €1.20. It follows that a drop in prices of 30% represents a considerable market adjustment. To put it in concrete terms:

Price of property X in summer of 2008: €200,000
Cost to UK buyer in pounds in 2008: £158,730
The same property after 30% reduction: €140,000
Cost to UK buyer in pounds in 2010: £116,666

This is a net reduction for a UK buyer of 26.5%.

Have all prices reduced?

Briefly: no. Sellers will all have different circumstances to consider. There are, for example, those who say they are in no hurry to sell, and are happy to wait for an upturn. The difficulty in this position, as we have pointed out to them, is that supply currently outstrips demand to such an extent that, with reducing prices, their property will simply look too expensive and be ignored. Nor is there any sign of an upturn in the near future. It is more likely that prices will gradually firm up before increasing materially. If you are in no hurry to sell, and don't want to reduce your price, we advise withdrawing your property from the market.

At the other extreme is the seller in a hurry to sell, because of family or other pressures. In these circumstances there is no alternative but to slash the price drastically by – we recommend – some 30%. This will not guarantee a rapid sale, but at least it puts you in prime position.

Should all sellers reduce their prices by 30%?

Not necessarily. Some sellers may be uncomfortable about doing this, representing as it does a considerable downgrading of a major asset. However, some reduction would be appropriate in any event – if only to take account of the extent to which supply is outstripping demand.

But how much should this be? The position may be clearer if we adapt the example laid out above:

Price of property X in summer of 2008: €200,000
Cost to UK buyer in pounds in 2008: £158,730
Cost to UK buyer in pounds in 2010: £166,666
Amount achievable for £158,730 in 2010: €190,476
.
In other words, a reduction of 5% in the euro price keeps the property at the same cost in sterling. Our advice is to make as substantial a reduction as you can afford. Buyers will be looking at value for money. They are currently able to pick and choose. Price is of major importance.

A good time for buyers – where are they?

In the circumstances I have described you would expect the buyers to be flooding in. Indeed, for anyone with ready cash there are numerous excellent opportunities to make a killing.

However, although visitors to our website are running at about 40% more than at the same time last year, this is not yet translating into an increase in buyers on the ground. As regards British buyers, indications are that they are not yet feeling bullish about investment. The UK's economic situation, prospective changes in capital gains tax legislation, the continuing difficulties of obtaining credit, not to mention a general awareness of the need to reduce personal indebtedness, all contribute to a climate of uncertainty.

Reports on the French property market as a whole usually comment on the decline in British buyers. In certain areas – such as Paris and the Côte d'Azur – there has been an influx of purchasers from Russia and the Middle East. But the Dordogne and south Charente represent a somewhat different market, which does not offer the same appeal to this kind of foreign buyer.

What of French buyers?

The reduction in transactions in the Dordogne is not entirely accounted for by the absence of the British. French buyers – who tend in any event to favour newer and more convenient properties - have been finding it difficult to obtain loans. Furthermore, the French economy and prospective reforms to the French pension regime are likely to cast a continuing shadow over the property market.

What lies ahead?

The Dordogne property market is no different from other property markets in that it is cyclical in nature. Sooner or later there will be an upturn, however gradual. We take comfort in the fact that the UK and other European countries are at last facing up to their economic problems and taking appropriate action. The fact that visitor numbers to our website are climbing is a source of cautious optimism. But the timing of a recovery remains uncertain.


Antony Mair

MCM Dordogne Property