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Economy in Brief

French Housing Starts JumpĀ 
by Robert Brusca August 28, 2007

In France home construction is being stimulated by new tax rules. The new fiscal incentives allow home-buyers to deduct 40% of their mortgage interest payments from taxable income during the first year of contracts signed after May 6 and 20% during the four following years. This accounts for the jump in starts in May (up by 34.2% over April) and for April's nearly 30% drop from March as demand was depressed until after the new rule took effect. This incentive should allow developers to reduce stocks of unsold units built up in 1Q. The incentives will offset rising short- and long-term interest rates. Developers surveyed in July said buyers' financing had improved recently and expected this trend to continue in the near term, according to the national statistics institute Insee. The outlook for housing starts, based on permits on hand, has stabilized after a marked erosion since the start of the year. The new rule seems to play a large role in the timing of activity in French housing so far this year.

French Housing Starts
  Jul-07 Jun-07 May-07 3-Mo 6-Mo 12-Mo
Starts 2.7% 4.6% 34.3% 333.2% 66.4% 30.1%
Permits 1.9% -3.8% 11.6% 43.0% 6.0% -1.3%
3-Mo average
Starts 11.8% -0.3% 8.3% 112.7% 45.5% 15.0%
Permits 2.9% -6.2% 1.9% -6.4% 11.5% 0.1%
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