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The real estate boom is coming to an end in France


“The Roaring Twenties are over”: seven years of incessant rise in old real estate in France are coming to an end, with a price increase of 0.5% in the second quarter, a probable prelude to a decline. The Notaires-Insee index published on Thursday, which is a reference for its completeness, reports a 0.5% increase over one year in prices in France (excluding Mayotte). This has been a very clear slowdown since mid-2022. From 6.8% in the second quarter of 2022, the rise has fallen to 6.4%, 4.6%, 2.7% and now 0.5%.

“The Roaring Twenties are over; we are going to move on to another paradigm of real estate”, warned Elodie Frémont, president of the real estate statistics commission of the Notaries of Greater Paris.

Inflation and rate

The causes are multiple, but the main one is the surge in interest rates, which have increased the cost of loans, underlined Elodie Frémont. “From now on, you have to save, or in any case make substantial contributions, so that the credit file can even be instructed, we don’t even talk about its success at the exit”, she observed. “It’s the revenge of cash”, for those who have the means, she added, noting “a small rebound in family loans, friendly loans, and a great help from mom and dad thanks to donations. “

Inflation, which eats into the rest of households, also pushes prices down, especially for houses, noted Elodie Frémont. “When you have a house, you need a vehicle, so it has an impact on the price of gasoline, it has an impact on energy consumption and it has an impact in the event of a sale with the energy standards which are now binding, when you are poorly rated, to do renovations and (…) an energy audit”.

Houses, the prices of which had exploded in 2020, at the end of the confinements, nevertheless remain on the rise throughout the country, with prices increasing by 0.9% over one year. Unlike apartments, whose average price has not changed.

Sellers under tension

If the buyers are under pressure, the sellers are just as much. As prices are falling, those who can withdraw their goods from the market, and “the one we find around our table is the one who finds himself in a financial situation which forces him to sell, or a personal situation which make that he has no choice: divorce, separation or succession”, noted Elodie Frémont.

Consequence: the number of transactions, an indicator of market activity and which had reached an all-time high (more than 1.2 million) in 2021, continues to decline rapidly. For the whole of France excluding Mayotte, it stood at 1 million, a figure still higher than the historical average, nevertheless notes INSEE.

Drop in sight

A general drop in prices, already observed by the agency networks, should not be long in coming. “Without a doubt, the decline will accelerate”, judge Thomas Lefebvre, scientific director of Meilleurs Agents. Interest rates have indeed accelerated their rise from the first quarter, when the State has relaxed the conditions for granting.

“The purchase becomes less and less financially attractive, because to make your purchase profitable, you have to wait longer and longer”, also notes Thomas Lefebvre. Guillaume Martinaud, president of the Orpi branch network, also points the finger at housing policy, judging the conditions of access to credit still too restrictive. Several measures are likely to deter real estate investment, he also judges, such as the increase in property tax in many cities, the end of public aid or renovation obligations. “All this does not help to offer more housing on the market”, he squeaks.