"Courbe de Friggit" and "tunnel de Friggit", what is it?
From 1914 to the 1960’s, home price evolution in France was very uneven : relative to disposable income per household, rent and home price indices dived from 1914 to 1948, as a consequence of rent controls implemented from WWI, then rebounded until the 1960’s, following the « 1948 law » which organized the exit from rent controls.
Then, home price evolution stabilized. See § 1. of this presentation about home price evolution in France.
Since the mid-1970’s, the index of observed rents (corrected of structure changes), relative to income per household, has been almost constant : it has been hovering in a 20% wide horizontal « tunnel ». See the blue curve on the chart below. See also this presentation about rent and income evolution in the long run.
From 1965 to 2000, as well, the index of home prices has been very stable relative to income per household, hovering approximately in the same « tunnel ». Nevertheless, in 2002, it exited this « tunnel », increasing sharply. In 2008, it stabilized around 70% higher. After 2020 it grew again. See the black curve on the chart below.
The contrast between the high level "levitation" of the home price index and the stability of the rent index, both relative to income per household, is a consequence of the inflationary effect of the financial context, and particularly of very low interest rates. See this exhibit about « home prices, rents and the risk-return tradeoff of real estate investment ».
Home price prospective thus involves financial context prospective. A return of the latter, including interest rates, to conditions which prevailed around 2000, will entail a return of the black curve into the « tunnel ». See § 6. of this presentation about house price evolution.
Retour au dossier sur le marché immobilier depuis 1200
To English page : Property Market in France since 1200