Paris Prices Stagnant, Suburbs Gaining Ground

SALES VOLUMES AND PRICES AT THE END OF SEPTEMBER 2021 IN PARIS AND ILE-DE-FRANCE

(As reported by the Chambre des Notaires de Paris November 22, 2021)

The dynamics that have been at work for several quarters are continuing with exceptional activity. Confidence in real estate, the desire to own a home and to be well housed, after the hardships of confinement, continues. In many geographic areas, activity levels have never been so high, attesting to the sector’s good health and the pressure of demand.

In this context, and in third quarter 2021, prices are still on the rise but with increasingly divergent trends between housing types and market segments. The new aspirations of Ile-de-France residents, their desire for more space and greenery, and the development of telecommuting are strengthening demand for the purchase of homes, particularly in the inner suburbs. Price increases remain strong for houses (+7 percent in one year in our region in the third quarter of 2021). According to leading indicators on pre-sale contracts, the upward trend in house prices could strengthen further by January 2022. On the other hand, price increases will moderate for apartments, as the stagnation of values in the Capital gradually spreads to the rest of the collective market.

After this exceptional phase, the first indicators for the fall suggest a pause in activity, which is actually beneficial, in order to maintain a fluid and healthy market.

The drivers of activity have not changed: the attractiveness of home loan rates and the accessibility of financing have accompanied the desire to become a homeowner, reinforced by the search for comfort and security, following the confinement.

A large number of people in the Paris region have completed their real estate projects in the third quarter of 2021. The volumes of sales of resale houses progressed 24 percent compared to the same period in 2020 and 17 percent compared to the average of these last 10 years, which constitutes a more relevant reference to be practically as high as in the third quarter 2019 (-3 percent). It is reminded that record sales volumes were achieved in 2019.

Activity rebounded in the Capital in third quarter 2021: +39 percent, or 2,800 additional sales, compared to third quarter 2020 and +17 percent compared to the average of the last 10 years. The stagnation of prices and a now slightly more abundant supply have probably encouraged some hesitant buyers to make their acquisition this summer.

Against this backdrop of overall growth in activity, the market for apartments in the Petite Couronne was slightly less buoyant. In the third quarter, apartment sales volumes were up 16 percent compared with the same period in 2020 and only 8 percent compared with the average for the past 10 years. On the contrary, the market for houses in the Petite Couronne saw its sales volume accelerate (+26 percent). However, here again, sales volumes are not very significantly above the average for the third quarter of the last 10 years (+5 percent).

The upturn in favor, which the Grande Couronne area had already enjoyed for several quarters, has been further reinforced. Indeed, this market still offers affordable prices and a diversified and renewed supply. The properties available correspond to the new aspirations of the people of Paris who expect more space and a greener, less dense environment.

In the Greater Paris area, sales volumes rose in the third quarter by 21 percent for apartments and 23 percent for houses in one year, reaching a new historical record for the latter. The number of sales is also increasing very rapidly compared to the average for the last 10 years, with a 26 percent increase for apartments and 23 percent for houses, indicating a more structural attraction of this market.

The capital city remains outside the price increase dynamic. Prices are stagnating and have been fluctuating between €10,600 and €10,800 per square meter for the past year-and-a-half. According to our leading indicators on pre-sale contracts, this trend will continue until January 2022.

In the third quarter of 2021, apartment prices rose by 4.6 percent in the Petite Couronne and by 5.6 percent in the Grande Couronne in one year. According to our leading indicators on pre-sale contracts, price increases will then moderate. A few decreases between October 2021 and January 2022 would bring the annual increase in apartment prices to 1.5 percent in the Petite Couronne and 3.8 percent in the Grande Couronne.

Houses in the Paris region, which are now highly prized, saw their sale prices increase by 7 percent in the third quarter of 2021. The increase could still accelerate and exceed 8 percent in one year in January 2022.

In total, with nearly 187,000 sales of older homes over the past 12 months (from October 2020 to September 2021), a new historical record of activity has been observed in the Paris Region. However, the surge in activity in the region has been much less pronounced than for France as a whole.

Early indicators point to a slowdown in pre-sale contract volumes in the fall. A return in the coming months to still very high, but less exceptional, sales volumes therefore seems likely and perhaps even desirable in order for a supply that allows the market to flow smoothly to be reconstituted. This should not prevent 2021 from being an excellent year.

The Notaires du Grand Paris hope that, even in the event of a further deterioration in the health situation, the fluidity of the housing market will be preserved, with buyers still motivated and real estate professionals able to meet demand.

In addition to the specific constraints of the Ile-de-France region (high prices and lack of properties for sale), there are new expectations on the part of buyers, and it is still unclear whether these are cyclical or structural.

The chronic lack of renewal of supply and the construction deficit in the region in a context of increasing regulatory requirements (new environmental standards, zero artificialization of land) will be major challenges to maintain the attractiveness of the market and of the Paris Region, even though housing is benefiting from a real revival of confidence and housing credit rates are still very low.

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A bientôt,