Like 2020, 2021 has been extremely dynamic. The covid and post-covid effect is no stranger to this. Loan rates at that time were very low, hovering around 1% or even lower. The French then turned massively to buying goods. Between 2020 and 2021 the purchasing power of real estate remained almost unchanged. But in 2022, given general inflation and the conflict in Ukraine, rates have started to rise again, particularly since March, making home ownership more difficult and credit rates could reach 3% from the first quarter of 2023, i.e. tomorrow! Between 2021 and 2022, all of France’s largest cities lost square meters, with a special mention for secondary cities. The loss of square meters is even more striking if we compare the pre-pandemic era, i.e. 2019 and today at the end of 2022.
At the beginning of the year, Better rates unveils its annual review of real estate purchasing power in the 20 largest French cities between December 2021 and December 2022 and between December 2019 and December 2022. The broker also reveals its outlook for 2023.
Between the increase in the price per m² and the decline in real estate purchasing power: Le Mans, Saint-Etienne and Le Havre
These three provincial cities have continued to attract covid exits. The number of square meters then literally collapsed! Le Mans is the most striking example. Between 2022 and 2021, the city of Grand-Ouest lost 34 m² and between 2022 and 2019 it lost 41 m², unheard of! To go into detail, in 2019 future buyers could expect 123 m² of living space, then 109 in 2020, 116 in 2021 and over 82 m² in 2022! At 2,357 euros per square metre, compared to 1,930 euros in 2019, prices have increased by more than 20%.
« After a slight lull between 2020 and 2021, Le Mans is finally today in first place among the cities that have lost the most, combining the rise in tariffs with a very strong recovery in prices. “, underlines Maël Bernier, director of communication and spokesperson for Meilleurtaux.
Le Mans is not an isolated case. Its closest cousin Angers is also one of the worst affected cities. Between 2022 and 2019 it is THE city that loses the most square meters: 42 in total. ” In the case of Angers, as indeed in Le Mans, we are no longer talking about one room less but about two rooms less!, observes Maël Bernier. The attractiveness of this city is well established. Since the pandemic, you have attracted many Ile-de-France residents looking for more space and greenery. It is above all their arrival that has considerably increased the prices. The TGV effect comes into play, as does the proximity to Paris (55mn for one, 1h40 for the other) and these are cities that have finally recorded very low prices until 2020»
Saint-Etienne is also a very eloquent example. In just one year, the city lost 27 m² on an equivalent budget. Furthermore, in 2019, it was possible to acquire 159 m², the largest average living area in France; but if it is still the city that offers the most beautiful living space, we are down to 123 m² in isorevenues. Clearly, in three years, Saint-Etienne has lost 36m².
Finally, last on the podium of the cities that have lost the most real estate purchasing power in one year: Le Havre. The Norman city has lost 22m2. In 2021, a buyer could expect a living space of 99m2, while this year they will only have to settle for 76m2. The price per square meter has thus gone from 2,269 euros in December 2021 to 2,545 euros in December 2022. This contributes massively to the drop in m²” analyzes Maël Bernier. Let’s remember that a good file at the end of 2021 could be financed at less than 1% when today we are over 2%, this obviously has a strong impact!
Bordeaux, Lyon, Paris: are the cities better off?
On paper, yes, they are the three cities that lose the least square metres, both in 1 and 4 years. Paris is THE city with the least loss of purchasing power. In a year the capital loses “only” 2 square meters. Thus we go from 19 m² in 2021 to 17 m² in 2022. Again compared to 2019, Paris offered an average of 20 m². In total in three years the city has lost 3 m².
« Of course compared to the other cities mentioned above, this one doesn’t seem like much. But certainly the data are not the same, the prices are so high that the drop is certainly smaller, but the financeable surface remains 4 to 5 times lower than that of medium-sized centers, including those that have seen their surface drastically decrease habitable! We have to put into perspective with the price per square foot. In Paris it is almost 5 times higher than in Le Mans! “, explains Maël Bernier.
Bordeaux loses 6 m² in one year and thus goes from a living area of 45 m² to 39. In three years, the Gironde city loses a total of 8 m². ” In the end it’s not much because Bordeaux had suffered the price hike before 2020, clearly the worst was over “, adds Maël Bernier. As for Lyon, the city of Rhône-Alpes loses exactly the same area as Bordeaux, i.e. 6 m² between December 2022 and December 2021. It loses one square meter more than Bordeaux compared to 2019. In three years, Lyon thus went from 43 m² of habitable to 34 m².
« The rise in tariffs in 2022 is causing a real change of matrix and the consequences do not spare any city. If between 2021 and 2020 the purchasing power of real estate more or less stabilized within these metropolises, it will certainly be due to the fact that they were “a little” neglected after the covid. Today in 2022, Paris Lyon and Bordeaux have to absorb the increase in financing rates “says Maël Bernier.
These mid-range cities that are not left out
We talked about these cities that are happily losing more than 40m². But no less remarkable is the situation of the municipalities which have lost between 7 and 19 m2. The reality is that we are on a generalized loss of purchasing power, common to all of France.
Among this average ranking: Dijon, in one year the city has lost 16 m²! And compared to 2019, it’s 19 m². What are the reasons for such a loss in a few months? The tariffs of course, but also the price per square metre, which has almost risen to 200 euros in one year, going from 2,691 euros in December 2021 to 2,881 euros at the end of the year. Another example Nîmes. The city offered 109 m² in 2019, then lost purchasing power in 2020, thus moving to an area of 102 m². A year later, the city regained square meters with 107 m². But this year 2022 will have been fatal for him, as French Rome collapses to 90 m²! It has lost 19 m² in three years and in particular 17 m² since December 2021, compared to today.
What to keep from 2022?
Between December 2022 and December 2021, the average number of square meters lost in a year in France of France’s 20 largest cities is 13m². Rising interest rates are largely responsible for this figure. The “excellent” reference rates have thus gone from 0.70% last year to 2.20% this year. The financing capacity thus increased from 223,896 euros to 194,020 euros. ” Having to borrow less is directly a smaller house if the borrower has no savings to compensate!, explains Maël Bernier. If we look at 4 years between 2019 and 2022, an average of 20 m² is lost in France, so it is very clear that 2022 is the year that has done “the most damage” to the real estate purchasing power of the French . . »
What about 2023?
If 2022 remains a good year, it is mainly related to the fact that 1and quarter was particularly dynamic. Mortgage production was strong throughout 1and semester. Unfortunately, the sharp slowdown felt this summer will have consequences on the production of real estate mortgages from 1and quarter of 2023. Next year therefore promises to be very complicated. Indeed, the files processed and rejected in the autumn of 2022 will be visible in the production or (in the absence of production) of the Banque de France in the first quarter of 2023. Only then will we become aware of the situation. Until then, the usury rate will be updated and then raised in early 2023, but the problem will remain. Indeed, this usury rate takes into account the rates practiced during the previous quarter. Today, nominal mortgage rates are around 2.50% and could reach 3% in the first quarter of 2023. The “usury rate” problem will only be solved if nominal rates stabilize. Everything will depend on the evolution of OATs.
As for prices now, they will inevitably go down or at least stabilize. Don’t expect a significant drop. For this to happen, there would need to be a massive influx of goods into the market in the face of sharply declining demand. However, the scenario that seems to emerge is rather the following: a decline in buyers, of course, but also a decline in sellers. Why ? Simply because the difficulty of obtaining a loan potentially hinders many takeover candidates, even among those who are defined as “second time buyers”. Also, let’s not forget that for 4 years all French people who have made a real estate purchase, currently hold loans at less than 2%, which is an excellent financial investment, so barring constraints (death, succession, divorces, mutations, etc.), they will remain “warm” waiting for better days. Why risk selling if the chances of obtaining credit, moreover at a higher rate, are nil?
