OECD report is bad news for aspiring homeowners in France


Colin Randall
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For the working people of France, whether homeowning, renting or still in the family home, it has been a week of troubling news.

Employees of Carrefour supermarkets went on strike claiming to be so badly paid that even with staff discounts, they could not afford to shop where they worked.

A formal inquiry into one of a string of suicides among workers at France Telecom found the death to be professionally related. The weekly newspaper Journal du Dimanche was moved to ask whether the proper interpretation was that being driven to kill yourself was just another workplace illness.

And now, people struggling in difficult times may be in for another setback if the president, Nicolas Sarkozy, heeds advice from the Paris-based Organisation for Economic Co-operation and Development (OECD) and considers cutting back on mortgage lending.

Although the OECD felt this might be necessary to stem rising house prices, an inevitable consequence would be to put homeownership out of the reach of many.

Property values have not always been a principal priority of the French, certainly by comparison with close neighbours.

Slumps and booms come and go, but it still takes supreme skill as a middle-class London dinner host to stop conversation drifting towards house prices.

But in more than 40 years of travelling regularly to - and more lately living in - France, I have yet to hear the subject raised at gatherings of family or friends.

This is not because the French are too discreet to mention such vulgarities. Money matters crop up, but not house prices - not, at least, until now.

At present, the French are much more likely to talk about pensions, the new law banning face-covering veils and, yes, supermarket wages and whether pressure at work really causes suicide.

In the past, one obvious explanation for house prices being missing from the agenda was that unlike in some other countries, many in France tended not to bother themselves too much about joining the property-owning meritocracy.

In the city, especially Paris, they were happy to rent. In the country, the height of ambition might be to secure a small plot of land on which to build or have built a pavilion of your own design. Even if you were doing well enough to have both the rented Parisian apartment, probably very cramped, and the rural home for weekend escapes, the objective was not investment but comfort.

But Bloomberg News reports the residential estate agents' association, FNAIM, as noting that while house prices across France rose by an average of only 1.5 per cent last year, the increase in the Paris region was just under 16 per cent. This was expressed as a record €7,645 (Dh40,670) per square metre, a leap of 40 per cent in five years.

For the OECD, a prolonged period of easy finance "could result in a price bubble". If property prices go on rising rapidly, it says, "the authorities should implement explicit macro-prudential measures to limit the distribution of credit to households".

If money is too easily available on credit, it is felt, France faces a threat from the economic crisis that has touched other places.

The OECD report also had bad news for Mr Sarkozy as he looks around for positive sound bites to offer a disenchanted public one year before the next presidential election. It projected economic growth of only 1.6 per cent this year, against the 2 per cent predicted by the finance ministry. With the economy struggling to improve unemployment, which stands at 9.5 per cent, the OECD expects only a "moderate recovery", one scarred by lasting effects on public finances and job availability.

And in a country that cares a great deal more about quality of life than material wellbeing, the report had a sting in the tail on pensions. Mr Sarkozy's hard-fought law raising the minimum retirement age to 62 from 60, regarded by many in France as an outrageous attack on long-held privileges, was given faint praise as "a serious step forward".

On the long road to recovery, it seems, France can expect to encounter a few more bumps.