Sunday, November 30, 2008

Housing Costs--A French Bubble?

According to a forthcoming CAE report by Jacques Mistral and Valérie Plagnol, the average cost of housing in France has risen by 40% since 2004. Construction of new social housing slowed between 1996 and 2006, while demand for new housing rose owing to steady population growth, easier financing (longer-term mortgages at lower interest rates). Sounds a bit like the US housing bubble, doesn't it? And without subprime mortgages. Patrice Lanco's comment on the report (see p. 4) emphasizes a "struggle for space," but this is also evident in the U.S., where price increases were highest in markets where land for new construction was scarce.