Real estate: why the French market is not cracking

Real estate: why the French market is not cracking

Posted Oct 1, 2022, 8:00 AM

Real estate continues to resist the ambient gloom. Signs of tension have been building up for several months raising fears of a trend reversal, but so far the French market is staying the course.

On the scale of France, real estate prices increased slightly again (+0.3%) in September 2022 after a rise of 0.4% in August, i.e. an increase of 4.6% since the beginning of the year, according to the real estate price index Best Agents – “Les Echos”. It is now necessary to pay, on average, 3,182 euros per square meter to become an owner in France.

“No disaster in sight”

“Prices are stabilizing. There is no disaster in sight. We do not believe in a sharp market reversal because there are no decisive signals in this direction. Real estate remains interesting in an anxiety-provoking period when credit rates are still well below inflation,” explains Eric Allouche, executive director of the ERA Immobilier network.

With interest rates soaring, however, borrowers are in a race against time. Many buyers rush to finalize their project. The low inventory of properties for sale is another supporting factor for real estate investment. This rarity is accentuated by the difficulties of the new with the stopping of many construction sites, which postpones even more buyers towards the old.

“Most of the territories will be protected by the shortage of supply. This is one of the reasons why the market should not collapse, even if we cannot totally exclude the worst, the scenario of a crash, in the event of a very sharp deterioration in the economic and energy situation. But the real estate market reacts slowly. It’s not like the stock market! says Thomas Lefebvre, scientific director of Meilleurs Agents.

American comeback

In Paris, the time of overheating seems well and truly over. The quasi-stability of prices is confirmed (-0.1% over one month) at 10,401 euros per m² on 1er october. “In the luxury segment, the market got off to a flying start in September thanks to the strong comeback of the Americans, helped by the soaring dollar. The Swiss are also once again very present, also benefiting from a favorable currency effect”, specifies Nicolas Pettex-Muffat, managing director of Féau.

The share of operations carried out by foreigners in Paris is nonetheless very low. “Even in the luxury segment (over 1 million euros) only 10% of transactions are carried out by foreigners, Americans in the lead”, nuance Thomas Lefebvre, considering that this is not likely to have a impact on the dynamics of Parisian prices.

Selling times continue to lengthen. In Paris, they amount to 68 days on average. It’s a week longer than three months ago, and almost twice as long as before the health crisis (30 days).

In the Top 10 major cities, prices continue to rise in Marseille, Toulouse, Nantes, Strasbourg, Montpellier, Bordeaux and Lille. Only the municipalities of Nice (-0.5%) and Rennes (-0.2%) saw prices fall in September, but they have risen sharply (by 5.5% and 4.5%) respectively since the start of the year.

“We must expect a price correction in certain cities that have become very expensive, such as Paris or Lyon, at a time when purchasing power is more constrained. More and more territories are marking time, and prices will adjust to credit conditions,” predicts Thomas Lefebvre.

The wear rate barrier [taux maximums auxquels les banques peuvent prêter, assurance et garantie comprise, NDLR] still blocks some households. According to Eric Allouche, this is a phenomenon especially present for first-time buyers, especially in Ile-de-France.

Rising prices in rural areas

The difficulties of financing the most modest and the economic crisis reinforce the attraction for peri-urban areas. The rural areas index (+0.8% over one month), which reflects the housing segment, has jumped 6.5% since January. In these more remote areas, prices are rising faster than in the medium-sized towns of the Top 50 (+0.4% in September, +5% since January).

For fragile households, it is the economic reality that takes precedence. They move away from the city center for budgetary reasons. This phenomenon is not new but it could accelerate despite the necessary additional expenses (works, car, etc.). On the other hand, the craze for green spaces linked to the Covid seems to be running out of steam a little. “We have seen some Parisians, who missed the city, return to the capital”, points out Eric Allouche.

VIDEO. The state of the real estate market in France


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