Real estate and increase in the minimum wage in November 2024: how much to borrow in the 20 largest cities in France?
The minimum wage increases by 2% in advance from November 1, 2024, instead of January 2025. At the same time, interest rates are still trending downward, as are the prices of old real estate. These 3 factors combined increase the real estate purchasing power of the most modest. Let’s see how much it is possible to borrow with a minimum wage in the 20 largest cities in France. Revaluation of the SMIC in November 2024 The SMIC (Interprofessional Minimum Growth Salary) will see a further increase on November 1, 2024, following the evolution of the consumer price index. This revaluation directly impacts more than 3 million employees in France. The minimum salary thus increases to €1,801.80 gross monthly, an increase of 2% compared to the previous amount (€1,766.92). The minimum wage is now €1,426.30 net per month, for an hourly amount of €11.88 gross and €9.40 net. This revaluation validated by decree published in the Official Journal of October 24 is part of the legal mechanism for protecting the purchasing power of the lowest paid workers. It applies to all sectors of activity, without exception, and also concerns employees whose remuneration is higher than the old amount of the SMIC but lower than the new amount. Fall in property loan rates Interest rates help to boost property purchasing power, since they have been falling since January 2024. In less than a year, they have gone from 4.50% (end of December 2023 ) at 3.60% on average over a period of 20 years (excluding borrower insurance and cost of collateral). Even the rates for the longest authorized period, i.e. 25 years, are below 4%. The fall in rates is accompanied by a relative relaxation of borrowing conditions, particularly for first-time buyers who are generally the drivers of the market. Banks are less demanding in personal contributions and are keen to revitalize the production of real estate loans, still down compared to 2023. At the end of August, annual transactions in the former showed a decline of 18.1% over one year (figures from Notaries of France), or 780,000 sales. The period is also marked by a decline in housing prices: -5% throughout the territory -7.2% in Île-de-France -4.3% in the provinces On the basis of preliminary contracts, notaries anticipate a slowdown in the fall in prices, to -2.2% for apartments and -2.9% for houses at the end of November. What borrowing capacity with a minimum wage in November 2024? The debt ratio is regulated and must not exceed 35% of net income, before tax, borrower insurance included. As a reminder, borrower insurance is an expense imposed by the bank to guarantee any real estate loan in the event of death and incapacity/disability of the insured. With a net minimum wage of €1,426.30 per month, let’s see how much it is possible to borrow based on the following postulate: average rate over 25 years at 3.80% borrower insurance rate at 0.36% (bank contract) With a debt rate of 35%, you can theoretically support a monthly payment of €498 per month (insurance included) and borrow €91,075 over 25 years. Over the shorter term of 20 years with an interest rate of 3.60% (insurance at 0.36%), the borrowing capacity drops to €80,969. Note that this calculation is purely speculative and that banks take other factors into account to grant financing: personal contribution other credits in progress professional stability remains to be experienced The borrowing capacity with a minimum wage in the 20 largest cities in France Based on the average prices per square meter in the 20 largest cities in France, here is how much space can potentially be purchased with a budget of €91,075. Cities* Average price m2 apartment Purchasable surface area (m2) Paris €9,279 €9.81 Nice €5,141 €17.71 Lyon €4,672 €19.49 Bordeaux €4,384 €20.77 Rennes €3,968 €22.95 Strasbourg 3,744 €24.32 Marseille €3,613 25.20 Villeurbanne €3,571 25.50 Lille €3,528 25.81 Toulouse €3,420 26.63 Montpellier €3,418 26.64 Nantes €3,371 27.01 Angers €3,190 28.55 Toulon €3,109 29 .29 Grenoble 2,683 € 33.94 Reims 2,629 € 34.64 Dijon 2,558 € 35.60 Nîmes 2,233 € 40.78 Le Havre 2,116 € 43.04 Saint-Étienne 1,298 € 70.16 *Best Agents figures as of 31 October 2024 Saint-Étienne has the highest purchasing power given a price per square meter 7 times cheaper than in Paris, the city where the capacity for real estate borrowing is almost zero if you earn the minimum wage. To put these figures into perspective, note that the surface area of a studio is between 9m2 and 30m2, and the average surface area of a T2 is 45m2. Boost your purchasing power with insurance delegation Our example is calculated on the basis of an insurance rate of 0.36% on the borrowed capital, i.e. the average rate observed in lending establishments. By delegating loan insurance, it is possible to optimize your borrowing capacity, because alternative offers are up to 3 or 4 times cheaper than the bancassurance group formulas. For a borrower aged between 25 and 35, the average insurance rate offered by the broker Magnolia.fr is 0.09%. The cost of insurance then falls from €8,214 to €2,142, a saving of €6,072 which can add up to 4.67m2 to a real estate project in Saint-Étienne. Compared to December 2023, the real estate purchasing power of a minimum wage borrower increased by 7%, without taking into account the drop in real estate prices. Buying your home remains a challenge in most large cities for low-income households. But with 2 salaries, falling prices and the significant boost from the PTZ (Zero Rate Loan), the project of a lifetime can go from dream to reality. Reserved for first-time buyers of their main residence, the PTZ is extended to all of France and to individual homes in 2025. This aid makes it possible to finance up to 50% of the amount of an operation, and can thus increase the capacity of loan between 15% and 25%.
Real estate
31/10/2024
