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Paris Region Real Estate Market: Third Quarter 2023 and the Outlook

Volume XXI, Issue 47

Cover for the Notaires de Paris 3rd quarter real estate market report

Last week we looked at the real estate market in all of France. This week we will have a look at the real estate market only in the Ile-de-France—the region surrounding Paris. These figures were published by the Chambre de Notaires de Paris on November 30th for the Third Quarter 2023.

The shock is intensifying, with sales volumes down by more than a third and price declines on the rise. The deterioration in financing conditions is having an increasingly severe impact on the real estate market.

In the Paris region, in the third quarter of 2023, the fall in the number of sales of existing homes accelerated to 34% year-over-year, following a drop of 25% in the second quarter and 17% in the first quarter, compared to the same periods in 2022. The level of activity is now a quarter lower than it has been for the last ten years, highlighting the difficulties underway and testifying to the severity of the shock suffered by the market.

A difficult end to the year could see annual sales volumes of existing homes in the Paris region fall by more than a quarter, accompanied by annual price declines of between 6% and 8%, according to our leading indicators for pre-sale contracts.

The ongoing price correction could then be prolonged, as we expect, at best, a consolidation around the current level of home loan rates. Price cuts will give the market some breathing room, but will not be able to compensate for the decline in household purchasing power.

Initially, the correction that began in the third quarter of 2022 in the Ile-de-France region was organized in relation to historic, post-COVID peaks, leaving activity volumes still high.

It marked a return to a form of normality after an exceptionally dynamic period of over two years. The fluidity of the acquisition process was significantly reduced, with new constraints, but the market remained active.

Since the second quarter of 2023, activity has fallen below its long-term trend, to be precise 8% below the average second quarter of the last 10 years. The downturn intensified in the third quarter of 2023. Sales volumes plunged 24% below the average third quarter over the last 10 years. You have to go back to the third quarter of 2012 to find a third quarter this weak in terms of sales volumes.

At the same time, notaries are noting that properties with defects, and in particular energy-guzzlers, are suffering sharp discounts. A form of “wait-and-see” attitude, linked to the fear of not being able to find financing, has intensified.

Year-on-year, over the last 12 months (from October 2022 to September 2023), just under 150,000 existing homes were sold in the Paris region, 22% fewer than a year earlier. In other words, our region alone has lost 41,000 sales in one year.

In the third quarter of 2023, the overall drop in activity compared to the third quarter of 2022 (-34%) is still slightly more severe for houses (-37%) than for apartments (-32%). This is also true when compared with the average over the past 10 years (-20% for apartments and -31% for houses).

Activity had proved more resilient so far in Paris, with sales volumes remaining close to long-term trends thanks to a surge in sales of low-energy housing. However, sales volumes in the third quarter of 2023 were also 29% down on the third quarter of 2022, and 14% down on the average third quarter of the last 10 years. However, nearly 34,500 sales were still recorded over the past 12 months.

In the third quarter of 2023, prices per square meter (€10,090) in Paris fell by 5.3% in one year. The trend is set to continue thereafter, with a price of €9,760 expected in January 2024 (-6.3% in one year), according to our leading indicators on pre-sale contracts. Compared with the high point recorded in November 2020 (€10,860), the price has fallen by €1,100 and 10%. This would bring it back to the price level seen in spring 2019, four and a half years ago. In the Petite Couronne, the annual price decline accelerated for apartments (-6%) in the 3rd quarter.

Leading indicators on pre-sale contracts point to an intensification of the trend in the coming months, with an expected quarterly fall of 4.4% in January 2024 (and a further 2.7% after correction for seasonal variation).

This would leave an annual fall in apartment prices of almost 8% in January 2024. For houses in the Petite Couronne, the 6-percent annual decline in prices seen in the third quarter would also become slightly more pronounced (6.4%) in January 2024.

In the Grande Couronne, the annual decline in apartment prices, still slightly less marked than elsewhere, is accelerating, first in the third quarter(-4%) and then by January 2024 (-6.2%), according to leading indicators on pre-sale contracts. Houses could also see an acceleration in annual price declines (from -5% in the third quarter to -7.7% in January 2024).

Inflation, still high (4% year-on-year in October), eased thanks to a slowdown in energy prices. This is an encouraging prospect for interest rates, and has been accompanied by messages from some major banks to open credit lines.

However, many economists agree that inflation could remain persistently high, driven by the implementation of the ecological transition. As a result, although the situation is improving, there is reason to fear that the financial environment may be less buoyant for the long term than in recent years, when an exceptionally favorable environment enabled buyers to continue with their projects, despite the shock of the health crisis. In addition, the economic outlook, the climate of confidence and the geopolitical situation remain fairly deteriorated.

The entire housing chain seems to have come to a standstill. From tenants who are unable to complete their first purchase to second-time buyers who have given up for fear of not being able to complete their sale and find financing for their new project. In the new-build sector, the supply crisis and the difficulty of putting new homes on the market have been compounded by a breakdown in demand.

And yet, the people of Ile-de-France still want to become homeowners, and several structural factors (retirement funding, need for security, still low homeownership rate) mean that there is plenty of potential demand. But this demand is clearly no longer being met. Investors in existing property are also questioning the situation, given the low yields relative to other assets and the very unfavorable treatment of real estate.

The real, widespread adjustment in prices is still a long way from offsetting the rise in interest rates. The downward trend in both volumes and prices could therefore continue over the next few months, in a market where the traditional real estate cycle has been lost.

Read the report (in French) in its entirety.

A bientôt,

Adrian Leeds in ParisAdrian Leeds
The Adrian Leeds Group®

P.S. We were among the first expat real estate agencies to provide services for North Americans seeking to move to France or invest in French property. We have years of experience as well as relationships with top industry experts to help you with everything related to French property. Please visit our Services page for the full range of assistance we’re able to provide.


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