So far everything was fine. While it augured a still solid March, the Best Agents- “Les Echos” real estate price index (IPI) was halted for the first time since its establishment.
At the start of 2020, after two months of growth, the first fifteen days of March in turn attested to the incredible dynamism of the market. In just two weeks, prices in the ten largest cities in France had already increased by 0.2% and up to 0.5% in Rennes and Montpellier. In Paris, the average price per square meter was also up 0.5% and approached 10,600 euros.
But since March 16, the real estate sector has been contaminated by Covid-19. From the lock on the doors of the agencies to the pause for signatures by notaries, the entire transaction chain is seized up. Nothing is moving. And all the players are wondering how the residential market will react to the end of the crisis.
Price correction
“No collapse, but a fall in the price of housing is inevitable,” says Henry Buzy-Cazaux, president of the Institute of Management of Real Estate Services. “But we must distinguish the territories”, abounds Marie Hélène Pero, spokesperson for the Superior Council of Notaries. “The big cities will not unscrew significantly, because the price increase in recent years was not linked to speculation but a strengthening of their attractiveness,” says the notary.
In tight markets, such as Paris and large cities, “a correction of 5% is to be expected, because those who can afford it will be less impacted by the crisis” details Henry Buzy-Cazaux.
Two speed market
“Elsewhere in the country, the decline could be double, knowing that these territories do not have as strong an attractiveness and that their inhabitants have lower incomes there, with a risk that the crisis has weakened them more”, continues the president of the Institute for Management of Real Estate Services.
The crisis could then reinforce the distortions of a property market already at two speeds. “In small towns and rural areas in lack of attractiveness, where prices have stagnated for several years, the crisis could strike more severely”, says Thomas Gjerbine, economist at the Center for Prospective Studies and International Information
Household psychology
The risk for the market is that the wait-and-see attitude on the part of the purchasers is not anchored in time. “When everything was ready, a rental investor had to postpone his acquisition project because he could not put his property to rent,” says Marie-Hélène Pero.
“When all the conditions are met, we continue to carry out authentic acts. But the fall in the number of transactions remains inevitable, ”explains the notary. These are only 2,000 authentic acts that are passed daily against 15,000 in normal times, according to Jean-François Humbert, president of the CSN.
“In a context of economic uncertainty, households logically postpone their real estate purchase project, especially first-time buyers,” explains Thomas Gjerbine. A slow paralysis could thus hit the market and reinforce a fall in prices in the face of a fall in demand. “Without going as far as the crash,” adds the economist.
Financing capacity
The central factor to monitor will be that of the solvency of households, that is to say their ability to finance a property purchase. “If the savings rate of the French remains high and that the borrowing rates remain at the floor, the breakage should be limited”, judge Pierre Schoeffler of the Institute of the real estate and financial savings.
Provided that the banks continue to lend and that the credit crunch observed since the beginning of the year is corrected. “The solvency of buyers will be controlled by the support measures already in place for employees and the self-employed. Of course, all of this can be understood with confinement that would not last more than five or six weeks, ”says Henry Buzy-Cazaux.
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