The Dordogne Property Market – October 2010

It has been an up and down year - literally - for the sterling/euro exchange rate. At the beginning of 2010 the pound began to gain in strength, moving from 1.10 euros to just short of 1.24 in June. Numerous were the sighs of relief in the Dordogne as expats felt the strain on their budgets ease a little. Some of us dared to hope that the end was near, and that the climb would continue.

Alas it did not, and we are now back to 1.14 or so.

Impact of the exchange rate on Dordogne property

British buyers, who account for a large proportion of purchases of houses in the Dordogne and Charente, are deterred by high exchange rates. When the euro is strong, demand falls and prices follow. This is why prices of Dordogne property fell by 30% from mid-2008 to mid-2010, reflecting, with slight delay, the fall in the pound from 1.48 in January 2007 through 1.35 in January 2008 to 1.04 in 2009.

After the doldrums of the twelve month period from mid-2009 to mid-2010, when all estate agents were complaining of lack of business, there was a flurry of activity in the summer, when the pound strengthened. At last, we thought: signs of improvement. But it appears that, with the onset of autumn, activity has once again diminished.

Rises in prices?

What of prices, meanwhile? There have been some self-serving articles in magazines serving the "Buy property in France" market, indicating a rise in prices in the region. One of our French vendors said that prices were climbing in Paris so of course they are climbing in the Dordogne and Charente as well.

I too have read that the price of real estate in Paris has been rising. My understanding is that this is in part due to a shortage of stock. But I am no expert on Paris property. I do know one or two things about Dordogne property, however: and if prices are not falling they are certainly not rising either. The situation is fairly stagnant.

An abundance of stock

In the period between October 2009 and September 2010 we took on some 80 properties in the Charente and Dordogne. In the two previous twelve-month periods we had taken on a mere 50 in each. We are a small agency and do not take everything on that is offered to us, so these figures are conservative. What is important is the 60% increase.

The exchange rate has done all it can to depress prices. Vendors have been able to recoup a euro capital loss to some extent by repatriating funds to the UK at a more favourable exchange rate. But we are now at a point where the sheer quantity of stock on the market, far in excess of the amount required for weak demand, is inevitably going to prolong delays in finding a buyer. As a result, vendors may find themselves inclined to reduce prices further in order to achieve a sale.

The economic outlook

The UK's economic situation is currently uncertain, with many people concerned about the impact of governmental cuts. Journalists and economists are talking about a double dip recession. Clearly there is a bumpy ride ahead, and no rapid recovery in sight.

Other areas of the world are less beset by gloom: we have been encouraged by purchasers coming from the Middle East, the Far East and Australia. There have also been a number of prospective buyers from the UK, defying the economic climate and attracted to the Dordogne for all the usual reasons. But even if demand is stronger than before, it remains insufficient to absorb the amount of property on offer.

So the outlook continues uncertain, with no easy solutions. Property well-presented at the right price will continue to sell. But many vendors will have to remain patient for a while longer before there is any material improvement.

The green, green grass

The good news is all for buyers: an abundance of choice and low prices mean that it is an excellent time to buy. Prospective purchasers we have met have all been of the view that the time is right, and have often been fortunate in having funds available. They have been able to strike good deals and join the ranks of property-owners in the Dordogne and southern Charente with enthusiasm for this beautiful part of the world and the life-style it offers. Sometimes vendors need to forget about the grass on the other side of the fence and look at their own. It may be greener than they thought.

Antony Mair
MCM Dordogne Property