Paris Region Real Estate Market: 1st Quarter 2023 and the Outlook
Volume XXI, Issue 22
According to the monthly real estate communication published on Tuesday on the Chambre de Notaires de Paris website, the real estate market experienced further declines in activity in the first quarter of 2023, which had a significant impact on prices. Sales volumes of existing homes in the Paris region dropped by 22% compared to the same period the previous year. This decline follows a 6% drop in the Third Quarter 2022 and an 11% decrease in Fourth Quarter 2022. Sales volumes in the First Quarter 2023 are now below the 10-year average, reflecting the challenges faced by buyers in completing purchases.
The slowdown in activity and stagnant prices are expected to lead to a substantial annual decline in prices by July 2023. Apartments are projected to see a decline of close to 5%, while houses may experience a 3% decrease. These adjustments reflect the ongoing transformation and tightening of the market, which is likely to continue throughout the year.
The downturn in sales volumes is attributed to various factors, including tightening financial conditions, rising interest rates on home loans, loan refusals, increased downpayment requirements, and the challenging economic and social situation. The decline in activity affected all market segments, including Paris and its surrounding regions.
In terms of prices, there was a general peak in the Third Quarter 2022, followed by a gradual decline. In the First Quarter 2023, prices for apartments in the Paris region started to fall, with a 1.4% decrease in the Petite Couronne. Prices for apartments and houses remained relatively stable in the Grande Couronne. However, by July 2023, annual price declines are expected to be more pronounced and widespread across all markets in the Paris region.
These price adjustments are occurring amidst high inflation in consumer prices, driven by increasing raw materials, energy, and food prices. The real estate market continues to face challenges related to limited access to credit and rising interest rates, which have impacted demand.
Looking ahead, the outlook for households remains poor, with ongoing difficulties and uncertainties. Inflation is expected to remain high, and economic growth is projected to be weak. As a result, household purchasing power may decrease, and the labor market may experience a slowdown.
The ongoing decline in prices appears to be the primary adjustment variable to address the declining solvency of households. Simulations suggest a significant increase in monthly payments for property purchases by July 2023. Alternatively, potential buyers may reconsider their plans, such as the location and type of property they intend to purchase.
The overall situation is concerning, as the real estate market plays a crucial role in providing housing for households in the Paris region.
Prices per meter square range from €8,480 in the 19th arrondissement to €14,550 in the 6th (1.72 times more expensive than the 19th). The 6th arrondissement set a new price record at over €14,500/m², while the 19th dropped back below €8,500/m².
In the three most expensive arrondissements, Paris Centre and the 6th and 7th arrondissements, prices are holding up well, with annual rises of between 2% and 4%. The arrondissements most affected by the fall in prices are on the outskirts of Paris.
The bottom line: NOW IS THE TIME TO BUY IN PARIS!
It is important to note that all references to this information must cite the source: ADSN-BIEN – Notaires du Grand Paris.
If you like, you can download the report in its entirety (in French).
The Adrian Leeds Group®
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