Sarkozy should ready curbs for housing bubble, oecd says

President Nicolas Sarkozy’s government should consider curbing mortgage lending to counter rising home prices in France, the Organization for Economic Cooperation and Development said.

“There is a risk that a prolonged period of easy finance could result in a price bubble,” the Paris-based OECD said in a report released today. “If real-estate prices were to continue to rise rapidly, the authorities should implement explicit macro-prudential measures to limit the distribution of credit to households,” it added.

The comments, set out in the OECD’s Economic Survey of France, highlight concern that rising house prices may pose a risk to French banks and the recovery from the worst recession in more than half a century. Bank of France Governor Christian Noyer also warned last month that property prices may be on the verge of a “correction” as euro-area interest rates rise.

While house prices across France rose only 1.5 percent on average in 2010, prices in the Paris region jumped 15.7 percent to a record 7,645 euros ($10,789) per square meter, according to the national residential real-estate brokers’ lobby, FNAIM. Paris property prices have surged 40 percent since 2005.

Source: Bloomberg