Real estate prices have officially started to fall in France, all goods and regions combined. Professionals in the sector are plunging into the unknown, after several decades of growth. The state of play and the outlook are not very encouraging.
Here we are. For the first time in more than a quarter of a century – excluding the 2008 subprime crisis – average real estate prices are down in France, by 0.3% over one year last month, according to figures from the National Real Estate Federation (Fnaim). In addition, inflation must be taken into account, of more than 5% over the same period, which reduced the value of the goods by the same amount. “Yes, the period of continuous rise in prices is over, over”, confirms Loïc Cantin, the president of the federation. Whether new or existing housing, apartments or houses, in metropolises, medium-sized towns or rural areas, with the exception of tourist areas and second homes, all market sectors are concerned. by this reversal.
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The causes of the market downturn
Economically, the phenomenon makes perfect sense. If the prices of goods fall, it is because less is sold. In 2021, 1,169,000 transactions were recorded in the country, then 1,107,000 last year. And Fnaim experts do not envisage more than 950,000 sales in 2023. Again, this drop in volumes is easily explained: to curb galloping inflation, we have increased the cost of money, ie interest rates. “When they increase by one point, households’ ability to borrow falls by 10%. Since there has been a 2.5 point increase since September 2022, there are nearly 20% of buyers potential who can no longer carry out their operation today”, explains Loïc Cantin. The first affected being the less well-off households, the president of Fnaim fears that we are heading “towards an exceptional market which will exclude the greatest number of access to property”.
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Buy-to-let investment and the construction sector are down
There is then the risk of not having enough rental accommodation to meet demand. However, “unfortunately, the rental market is down,” notes the boss of Fnaim, who sees two reasons. First the collapse of 30 to 40% of new construction programs. Promoters, having already reduced their margins to cope with the increase in raw material prices, are finding it increasingly difficult to close their operations. Then, according to Loïc Cantin, because of the policy of energy renovation of housing wanted by the government, which is gradually removing thermal sieves from the market. “It’s a bad signal that leads many owners not to re-let their property and therefore to reduce the rental offer even more”, he judges. What put in difficulty in particular the young families in search of a first housing.
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Prices on a sustained downward trend
“The lights are red on all floors, it’s time to legislate again to give oxygen to the market”, pleads the president of Fnaim. This announces that in the short and medium term, prices should continue to fall. “The readjustment is inevitable, mechanical, we cannot escape it. And it is a cycle that will take time”, insists the expert. Fnaim estimates that there could be another 10% drop in demand this year, which should result in at least a 5% drop in property prices.
