What the Paris Property Market Looks Like as of February

The Paris Region real estate situation as of February 2023 was just released by the Chambre de Notaires de Paris.

The following is a translation of their report with editing and commentary:

The market slowdown continues in a difficult economic and social context and with persistent tension over the terms of financing purchases. Between December 2022 and February 2023, a total of 37,280 homes were sold in the Paris region, representing a 15% decline from the corresponding period spanning December 2021 to February 2022.

No market escaped the decline, although the apartment market proved to be slightly more resilient (-12% in Ile-de-France) than the housing market (-21%).

The situation has become progressively tighter over the months: the decline, from 9% in December 2022 compared to December 2021, rose to 17% in January 2023, and then to 19% in February 2023, compared to the same months a year earlier.

Over the three months observed, apartment sales volumes remain 2% above the 10-year average, but this is thanks to December 2022. The volume of house sales was 11% lower than the average of the last 10 years.

The Grande Couronne, which has been very dynamic in recent years, is more affected than Paris and the Petite Couronne for both the apartment market (-15%) and the housing market (-22%). After a very long period in which sales volumes remained close to historical records, Paris recorded an 8% drop in the number of apartment sales over the three months, but this still leaves a fairly high level of activity.

Our initial indicators for March confirm the continuation of these trends, indicating that we should expect a first quarter with weak sales and a deteriorated outlook, given the preliminary contracts received by notary offices, for the coming months.

The downward trend in prices is confirmed and becoming more widespread. In Ile-de-France over one year, from February 2022 to February 2023, housing prices are globally stable (+0.2%), with a slight decrease of 0.7% for apartments and an increase that continues for houses (+1.8%).

This annual variation considers price developments that are still sustained in the first half of 2022 in the Paris region (except for Paris), particularly for houses. But for several months now, and in line with the gradual slowdown in activity, the downward trend has taken over and spread to all markets.

In three months, from November 2022 to February 2023, housing prices fell by 2.3% (-1.4% after adjusting for seasonal variation). They fell by 2.2% for apartments (-1.5% in CVS variation) and by 2.6% for houses in Ile-de-France (-1.4% in CVS variation).

In Paris, the price of old apartments stood at 10,350€/m² in February 2023 (-1.9% in one year). According to prices from pre-contracts, it would fall to 10,140€/m² in June 2023. The fall in prices, which has remained moderate until now, is expected to increase to 4.3% in one year in the capital in June 2023.

A parallel movement is expected in the Petite Couronne, with a 4.1% decline in apartment prices from June 2022 to June 2023. The annual decline in prices will remain more limited in the Greater Paris area (-1.9%). For houses in the Paris region, in one year, from June 2022 to June 2023, prices could also fall by 2% (-3.3% in the Petite Couronne and -1.3% in the Grande Couronne).

Special Note: The new rules of the DPE (diagnosis of energy performance) have pushed up sales of “energy flats” in 2022.

For the past ten years and until 2021, the share of high-energy-consuming housing in sales has tended to decline to the benefit of energy-efficient housing, in a slow but steady movement. This trend suggested that the renewal of the housing stock was taking place with new homes with better energy performance becoming more and more numerous in sales, with also, at the same time, a possible preference of buyers for the least energy-consuming homes.

A sharp break occurred in 2022. The share of the lowest-rated homes (in “F” and G) surged in sales, probably with the changes and tightening of the energy performance regulations.

The share of homes sold with a “G” label in Ile-de-France has risen sharply in one year, both for apartments (from 2.7% in 2021 to 7.9% in 2022) and for houses (from 3.6% in 2021 to 8.5% in 2022). This is also the case for F-rated properties, whose share increases from 7.5% in 2021 to 11.8% in 2022 for apartments and from 10.3% in 2021 to 12.5% in 2022 for houses.

In contrast, the share of apartment sales labeled “D” has declined from 42.3% of the total in 2021 to 33.9% in 2022, while the proportion of those labeled “E” has consolidated (+0.7 points). Diagnosis “D” still accounts for the largest share of home sales (34.4% in 2022), but this was down in 2021 (38%).

Finally, the proportion of homes with a favorable rating (A, B and C) is trending downward for apartments, especially for class B. It shows only very slight changes for houses. It should be remembered that homes with an A and B rating are still marginal in sales, given the high level of performance expected.

Regulatory changes, which are likely to become more stringent over time with a gradual ban on renting out energy-intensive housing, and the prospect of costly and complex work, combined with the rise in energy prices, no doubt explain why owners of this type of property have wanted to get rid of them. These developments will naturally be monitored to see if the trends continue or even increase.

Moreover, the data aggregates energy labels of a different nature since the calculation methods and the limits have changed and some old diagnoses can still be used, even if the notaries frequently recommend an update in case of a rental project. Some caution is therefore required when analyzing historical data, which is not strictly comparable.

Note: The Climate and Energy Law has modified the method, content and presentation of energy performance diagnoses, which are now enforceable. It also introduced several new deadlines. Dwellings with an energy consumption higher than 450 KWH/m²/per year (and thus part of the G category) can no longer be offered for rent since January 1, 2023. This ban will then be extended to all properties labelled “G” on January 1, 2025, then to those in “F” and above on January 1, 2028 and finally to all properties with an EPD labelled “E” and above on January 1, 2034.

Read the report PDF in its entirety (in French).

A bientôt,