Property Prices Up on the National Level…But Paris is Down!
Volume XX, Issue 39
The following is a recap of a report recently issued by Meilleurs Agents:
It will come as no surprise to anyone: the trends observed at the start of the new school year by the teams of data scientists at Meilleurs Agents are confirmed at the start of autumn. The French real estate market is still resisting and even recorded a slight increase in prices at the national level (+0.3 percent in one month).
No surprise there either: it is the rural areas that recorded the best results with a new increase in real estate prices of 0.8 percent since September 1st. This is twice as much as the cities of the top 10 largest cities (+0.4 percent).
If Nice, Rennes and Lyon are marking time (respectively -0.5 percent, -0.2 percent and 0 percent), it is necessary to point out the good performance of Bordeaux and Nantes (+0.6 percent) and especially of Marseille (again!) and Montpellier. The two southeastern cities recorded the highest price increases this month (+1.2 percent and +1.3 percent) because these two metropolises also have in common a big shortage of properties for sale. In Montpellier, the stock has thus fallen by 27 percent in just four years.
For its part, Paris continues its slow tumble downward with a further drop in prices (-0.1 percent). Was the slight rebound observed last spring only a temporary jump? Apparently yes. Because in the capital, all the indicators are now red. Paris presents a low real estate purchasing power (24m² only). By way of comparison, this purchasing power is on average 51m2 in the 50 largest cities in France. Budget and conditions being equal, you can therefore buy twice as much elsewhere than in Paris! As if that were not enough, it is also in Paris that the rise in interest rates will have the greatest impact on household budgets. Last warning signal: sales times in the capital continues to lengthen. It is now 68 days on average compared to 60 days just three months ago. There are therefore clearly fewer buyers on the Parisian market.
And this negative spiral tends to spread throughout the Ile-de-France! And more particularly the inner suburbs, which are stagnating (here, prices have not changed one iota in two months). After a boom in post-Covid requests and the ensuing price hike, the time now seems to be calm in the Paris region. And no category of goods is spared. Popular since the beginning of the health crisis, houses are now experiencing the same downturn as apartments.
With some prices per square meter higher than those of other departments in the inner suburbs, Hauts-de-Seine (€7,296/m²) is therefore the first to bear the brunt of buyer disenchantment. In one year, they have seen their prices fall by 0.3 percent. While Seine-Saint-Denis, which is much more affordable in terms of price (4,325 €/m²), is still holding its own (+2.9 percent in one year), Val-de-Marne is beginning to slow down (+1.6 percent increase over the same period).
In the outer suburbs, the picture is hardly more positive. While it is true that prices there have still risen by 2.6 percent in one year (compared with +1.2 percent in the inner suburbs), a slowdown is slowly taking place. Here again, the most expensive departments are the first to be affected. Following the example of Yvelines (4,615 €/m²) which fell into the red two months ago (-0.3 percent) and Essonne (3,291 €/m²) which is marking time (0 percent since last August). More protected, the Val d’Oise has progressed by 0.2 percent since the summer (+3.4 percent in one year). The Seine-et-Marne, on the other hand, is the exception with an increase of 4.9 percent in one year (and 0.8 percent since the summer).
We dreaded it. It is a reality today. The rise in interest rates continues (1.9 percent on average on September 1, all loan terms combined). And the latest announcements from the European Central Bank do not bode well for a reversal of the situation. The historic decision of the European body to raise its key rates by 0.75 points on September 14, 2022—thus erasing a decade of rates below 1 percent—should in fact push banks to revise their rate schedules upwards and to be even more cautious in granting credit.
Beyond the sole question of the usury rate, which finds at least partial resolution in the rise to 3.05 percent on October 1st, it is indeed this change in monetary policy orientation that will push the banks to tighten the credit tap and which risks excluding many project promoters from the market. Especially since this already tense situation could continue to deteriorate rapidly as the aggravating factors are numerous. If this were to be the case, it would inevitably affect demand and negatively affect the real estate market.
Well, we’re not there yet. Phew! Because even in a worst-case scenario (interest rates at 4 percent for a twenty-year loan), the average affordability ratio would still be good, at around 34 percent. Even in the major cities, the effort rate would not exceed the 35 percent imposed by the High Council for Financial Stability (HCSF). In concrete terms, demand will remain solvent in a large part of France. Logically enough, the most expensive municipalities—Paris in particular—will be the ones most affected by a decline in demand.
The main thing to remember is that:
* property prices have increased by 0.3 percent on average in France since September 1; it is the rural areas that once again saw their prices increase more sharply (+0.8 percent)
* Marseille and Montpellier recorded significant price increases (+1.2 percent and +1.3 percent) and a severe shortage of offers;
* Paris continues to fall, with prices down 0.1 percent since September 1st
* buyers are beginning to shun Île-de-France and more particularly the inner suburbs
* despite the rise in interest rates, demand remains solvent over a large part of the territory
The point is…now is a great time to invest in Paris!
The Adrian Leeds Group
P.S. I will be taking a week off. From October 17 to 21 there will be no freshly-written Nouvellettres®. We may rerun some past issues…if you prefer not to miss a single issue!