Housing Market Half Year 2023
11th Sept 2023
After years of rising prices, the real estate market in France has changed direction.
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Housing Market Half Year 2023
11th Sept 2023
After years of rising prices, the real estate market in France has changed direction.
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Real estate prices have fallen by an average of -1% since the beginning of 2023, according to the latest figures from the notaires.
The fall is slightly higher for apartments (-1.1%) than for houses (-0.9%). As is usual, these averages mask many geographical disparities.
The fall is more marked in Paris and more generally throughout the Île-de-France. Real estate prices fell by -3.3% in Île-de-France in the first two quarters of 2023. The notaires state that recently signed contracts indicate that for the year the fall will be in the order of -6%, although the more prestigious arrondissements in Paris may be spared, due to the strong presence of foreign buyers.
In the Auvergne-Rhône-Alpes and Hauts-de-France regions prices have declined by 0.9% and 1.7% respectively since the beginning of 2023. In contrast to the rest of the France, house prices in these two regions are correcting more sharply than apartment prices. The price of apartments fell more in Lyon (-3.7%) than in Paris.
The fall in prices is not, however, affecting the whole country. The Provence-Alpes-Côte-d'Azur region is a notable exception. Since the beginning of 2023 real estate prices have risen by +1.7%. However, this increase was driven by apartment prices (+2.6%), while house prices fell slightly (-0.2%).
Similarly in Marseille the price of apartments increased by +1%.
According to the notaires, the fall in prices in urban areas is being matched in rural locations, although there is no analysis of this market.
The graphic below from the notaires shows the movement in prices since 2011, for apartments and houses.
The notaires state that the turnaround in the real estate market is mainly due to the tightening of monetary policy in the euro area.
More specifically, the increases in key interest rates decided by the European Central Bank (ECB) has reduced the purchasing power of buyers and has therefore negatively impacted the demand for real estate. Mortgage rates are now 4%+, the highest seen since 2011.
In addition to a decline in prices, the notaires point to a decrease in sales. Between July 2022 and June 2023, 1 million sales took place. This is about 12% less than between July 2021 and June 2022 (1.14 million). Many prospective sales are falling through as buyers fail to obtain a mortgage.
The growing difficulties of access to credit and the loss of purchasing power linked to the soaring rates therefore remain the main cause of the market downturn.
The extent of the decline in house prices remains, for the moment, relatively moderate. Indeed, despite the developments observed since the beginning of 2023, real estate prices remain at a high level. This is hardly surprising, given that the housing market has seen record increases over the past decade, driven in part by low interest rates.
In Lyon, for example, the price of old apartments has returned to its June 2020 level. However, it is still almost 50% higher than in 2013.
The situation is similar in Paris: the price of apartments has returned to its pre-Covid-19 level, but is still 22% higher than in 2013.
Market analysts Meilleurs Agents, forecast a fall in prices on average of -4% for the year with sales falling to around 900,000, before a recovery in 2025, as inflation is tamed and interest rates start to fall back.