# French method of stopping spiralling house prices



## pernickety (17 Sep 2006)

I'm living in France and was watching an interesting programme on the tv tonight called "capital" which looks at different subjects every fortnight. tonight they were discussing the property market, the difficulties in buying, the increases in the past 5 years esp. around the Parisian region.

one mayor of a town bordering Paris has decided enough is enough and has come up with a perfectly legal way of controlling prices. His town, Pantin, has become v. expensive and he sees the rich moving in and all the locals being forced out. To stop this he now steps in when he thinks a seller is asking a ridiculously high price and offers to buy the house/apartment himself (on behalf of the town) at the real market value which could be 15 or 20% lower. According to french law the town has the right to do this.

Just wondering what your opinion is on this? Could it work in Ireland? (Of course the obvious problem is the Pantin person wanting to trade up, losing the ridiculous profit when selling but still having to fork out when buying in another town).


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## Calina (17 Sep 2006)

No, for the reason that our local government system doesn't have very much autonomy at all. 

What I like about the French system in general is that if you meet the asking price, they have to sell to you. I believe quite a lot of property price growth in France in the past five or six years is attributable to foreign buyers, incidentally, and certainly, it has had the impact of dragging people into higher wealth tax bands which is not altogether welcome either. 

I assume that mayor is SP? (oh, just checked - yes he is. There's a surprise).


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## extopia (18 Sep 2006)

I love France, but I really wouldn't look to the French for lessons in market economics. 

Basically the guy is interfering. Who determines the "real" market value?


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## pernickety (18 Sep 2006)

extopia said:


> Basically the guy is interfering. Who determines the "real" market value?


 
Yes maybe, but wouldn't you love to be buying in his area? Who determines "real" value: I would say the estate agents and the media, the buying public just plod along after, delighted to be given the opportunity to buy.


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## Sherman (18 Sep 2006)

pernickety said:


> Yes maybe, but wouldn't you love to be buying in his area? Who determines "real" value: I would say the estate agents and the media, the buying public just plod along after, delighted to be given the opportunity to buy.


 
No, ultimately it is the buyer who determines the market price.

Obviously, the market price is whatever the highest bidder is willing to pay for the property. Nobody can be forced to pay a price that they consider is over the odds. That is how a free market works - buyers ultimately set the price - if they are not willing to meet the asking price, they don't buy - the asking price drops in response, until an equilibrium is reached between what the vendor is willing to sell for, and the buyer is willing to pay.

Market manipulation (by P.S. mayors of all people!) is doomed to failure and corruption.


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## room305 (18 Sep 2006)

I think this is an awful idea and I'm glad it never caught on here. Given the market distortion that occurred through the injudicious use of tax incentives here, can you imagine the mess that would occur if the government could actually _set_ the house prices (or step in if they deem them to price to be overvalued)?

The scope for corruption here is enormous. Friends of the government could flog houses at vastly inflated prices to the market, assured that the government would never call them "overvalued". Buyers would be lulled into a false sense of security by the implicit government guarantee and would happily overpay.

What kind of prejudices would come into play here as well? House prices in disadvantaged areas might be kept down in this manner, making it impossible for people from these areas to ever move outside of them because of the vast gulf in prices.

I agree with Sherman, all market manipulation is ultimately doomed to failure.


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## blindjustice (18 Sep 2006)

room305 said:


> The scope for corruption here is enormous.



aint that the truth


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