House Market in France in Landing Zone
24th Nov 2022
As inflation and interest rates rise, the French housing market has started to slow.
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In their latest review of the market the notaires report that over the 12 months to August 2022 house sales were 1.1 million. That compares to a peak of 1.2 million in the year to September 2021.
The slowdown in sales occurred in June (-3.7%) and in August (-5.6%), with similar early signs in September and October.
The national association of estate agents, FNAIM, report a similar trend, but like the notaires they point out that the level of sales remains exceptionally high.
With sales falling, price rises are tapering off, and negotiations are now possible on the selling price that were not apparent a few months ago.
Nevertheless, given the time lag in the publication of statistics for most recent sales, the notaires only provide price figures to the end of June.
They show that prices of houses outside of Paris grew by +1.6% between the first and second quarter of the year, and that over the year to June 2022 prices rose by +9.0%. Provisional figures for the third quarter show a rise of +8.2% for houses and 4.1% for apartments over a year.
In the Ile-de-France, prices rose by +0.3% in the second quarter and +5.4% over the year. In contrast, the price of apartments in the capital fell by -0.8% a downturn that is confirmed for the third quarter
FNAIM provide more up to date figures to September 2022, but they are by no means definitive. Like the notaires they consider prices in Paris have fallen (-3.0% year-on-year), whilst in almost all other areas prices increased over the year.
Apart from seaside resorts (+11.3%) and ski resorts (+9.3%), where prices are still rising sharply, some rebalancing of prices is occurring at a national level, with prices increasing less in those areas where they are already high.
Outside of the Ile-de-France, FNAIM state house prices are up overall by +8.8%; in rural areas and small towns prices are up by +7.8% in the year.
On a departmental level, the most dynamic area has been the west of the country, as can be seen from the graphic below.
Source:FNAIM
Outlook
Looking forward, all the commentators consider that whilst the real estate market cannot escape the wider economic downturn taking place, a market crash is unlikely.
The notaires state that "There is no need for alarm at this stage, although inflation and energy costs will have a major impact on the purchasing power of the French in the months to come.”
They consider that at a time of uncertainty and unpredictability real estate remains a "safe haven".
Likewise, FNAIM consider that whilst there are signs the market is "entering a zone of turbulence" it remains "solid."
President of Laforêt immobilier Yann Jéhanno considers that, "All major cities, with the exception of Marseille, are in the phase of price landing or decline and there is no reason for this trend to stop in the coming months."
The problem is amplified by the entry into force, in January 2023, of the ban on renting the most energy-inefficient housing, as we reported in Energy Efficiency Surveys. This will increase the amount of the stock on the market, thereby further dampening prices.
Outside of the cities, although post Covid these areas are popular, they have "reached a ceiling", he says.
For Guillaume Martinaud, President of the Orpi national chain, "The number of buyers is slowing down, and we are seeing a return to normal in the market after two particularly dynamic years."
The views of agents are shared by most economists in France. They point to the growing gap between prices and income, which has been taking place over the past 20 years. Only as a result of low interest rates and a loosening of the conditions of credit has that gap been managed. With interest rates on the rise and conditions of credit having been tightened, a downturn looks inevitable.
FNAIM point out that the outlook for a market is not only about capacity to buy, but also about the desire to do so.
Accordingly, perhaps the most useful indicator of the outlook is the regular survey undertaken by the national statistics office INSEE into the level of household confidence, which is at its lowest for over 20 years, as shown on the graphic below.
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