France introduces new measures to boost depressed housing market

PARIS (Reuters) - France announced new measures to boost its depressed housing market on Monday, providing 2 billion euros ($2.15 billion) in tax relief to banks offering new zero-interest mortgages, in the hope of firing up lacklustre economic growth.

The measures will widen the number of people eligible for the existing PTZ scheme ("pret a taux zero" or zero-interest mortgage). First-time buyers under a certain income threshold will get the financing for up to 40 percent of the cost of a new property, up from 18 to 26 percent now.

"Many poor and middle-class households have lost hope of one day owning their house," Housing Minister Sylvia Pinel said as she introduced the new steps. "We are taking these measures, which will have a quick impact on construction and renovation, to restore confidence."

Sluggish construction has been one of the main drags on the French economy in recent years. A rapid increase in property prices during the 2000s has only partially subsided since 2012, leaving first-time buyers reluctant to enter the market.

Pinel said she hoped the new measures and a batch of others would create at least 50,000 jobs. Budget Minister Christian Eckert said they would cost 2 billion euros but would only have an impact on government finances from 2017. They take effect on Jan. 1, 2016.

The French statistics agency INSEE said earlier this year depressed construction explained much of the growth gap between France and its eurozone peers in the last couple of years, dragging down GDP by 0.4 percentage points.

Investment in the construction sector will fall 3.9 percent in France this year, after a 3.3 percent drop in 2014, INSEE said. It is set to dip by only 0.5 percent in the eurozone as a whole in 2015, after falling by 1.3 percent the year before.

In October, morale among executives in the sector remained much below its long-term average, unlike that for services and manufacturing.

Accounting for more than 8 percent of private-sector jobs, the construction sector is also key to helping President Francois Hollande reduce France's unemployment rate, now over 10 percent.

(Reporting by Michel Rose, additional reporting by Simon Carraud, editing by Larry King)