The Paris Property Market is Holding Up Well Against the Odds of Covid-19
Volume XIX, Issue 37
The following report was published by the Chambre de Notaires de Paris September 8, 2021 based on sales volumes and price points as of the end of June 2021. This is their report in its entirety, translated from French for your easy reading:
Uncertainties related to the end of the health crisis are not preventing the residential real estate market from holding up. In line with previous months, demand has remained strong and sales volumes high in second quarter 2021, 13 percent above the average for the second quarters of the last 10 years. The drivers of activity have not changed. The health crisis and telecommuting continue to refocus households on their homes, seeking more quality of life and security, in a still fluctuating environment. Real estate loan rates are still very attractive and are encouraging people to make their purchase plans a reality.
In the second quarter of 2021, the annual increase in sales prices moderated in the Paris Region, at around 2 percent for apartments and 5 percent for houses. This slowdown may only be temporary. Only the market in the capital, which is slightly less dynamic, will keep prices slightly down compared to October 2020. This annual erosion of prices in Paris should not, however, mask a slight recovery since June.
Between now and the end of the year, the outlook still looks good. In the longer term, one cannot help but fear the possible consequences of the end of the expansionary monetary and fiscal policies currently in place.
The health crisis has confirmed the refuge value of housing. Housing sales volumes rose by 20 percent between the second quarters of 2020 and 2021. But a first strict confinement, leading to a severe braking of the activity, makes the comparison rather insignificant.
On the other hand, sales in second quarter 2021 are almost as high (-3 percent) as in second quarter 2019, the best year overall in our historical series going back to 1996.
Following the very slight decline in the first quarter, the first six months 2021 old home sales volumes are not quite back to the level of 1H 2019 (-2 percent) but are 13 percent above first semester 2020.
Over the last 12 months, from July 2020 to June 2021, sales volumes (171,800 older homes) are globally stable (+1 percent) in Ile-de-France compared to the same period a year earlier, while they are up 17 percent across France. As the quarters go by and following the health crisis, changes in customer expectations seem to be confirmed, with less interest in the Paris region and the heart of the urban area, and renewed interest in homes.
In the second quarter of 2021, sales of older homes rose by 13 percent compared with the average for the second quarters of the past 10 years, with little difference between apartments and houses across the region (+13 percent and +12 percent respectively). However, in detail, the surge in the Grande Couronne, both for apartments (+29 percent compared to the last 10 years) and for houses (+17 percent), is actively contributing to this increase. The latter is more moderate in Paris (+6 percent) and for apartments in the Petite Couronne (+9 percent). The volume of house sales in the Petite Couronne is stable (-1 percent).
But this market is constrained by the lack of properties for sale, and the rise in prices reflects the pressure of demand.
Stagnation of prices in Paris and upward trends elsewhere, even if a slowdown occurred occasionally in the second quarter of 2021
In Paris, for the past year, prices have paused and are fluctuating in a range between €10,600 and €10,800. In the second quarter of 2021, the price per square meter stood at €10,650, at a level equivalent to that observed one year earlier (-0.2 percent).
In detail, prices peaked in November 2020 (€10,860 per square meter) and then eroded slightly for 6 months, giving up a total of €260 and 2.4 percent from the high point. Since the low point in May 2021 (€10,600 per square meter) and as the months go by, prices are now trending very slightly upward, confirming the assets and the capacity to attract that the Capital has despite everything.
A price per square meter of €10,770 is expected in October 2021, which would be close again (within €90) to the price record reached in November 2020. However, compared to October 2020, the price in the Capital would decrease by 0.8 percent.
For the rest of the Ile-de-France region, the situation is very different, with an extension of the upward trend, even if the rise in prices was more moderate in the spring.
The house, still in high demand, still shows the largest price increases in the region (+5.1% in one year) in the 2nd quarter of 2021, slowing very slightly compared to previous annual increases (6.8% in the 4th quarter of 2020 and 7.3% in the 1st quarter of 2021). However, as of the fall, the annual price increase could again increase (7% in October 2021).
In one year, apartment prices rose by approximately 4 percent in both the Petite and Grande Couronne regions in the second quarter of 2021. The annual price increase would increase by October in the Grande Couronne (+5.9 percent) and would slow further in the Petite Couronne (+3.3 percent).
A still favorable environment for the next few months, but after that?
In the longer term, many factors of fragility and uncertainty remain. These are essentially linked to the end of the exceptional situation, with particular questions about the future level of interest rates and households’ ability to access credit. At the same time, changes in buyers’ expectations in terms of housing and location, particularly in connection with telecommuting, are raising questions. It is still too early to know whether this trend will continue, with lasting and structuring consequences for real estate markets.
However, the first indicators for the summer remain positive, and many factors give reason for optimism between now and the end of the year.
The health crisis remains a daily constraint that continues to create many uncertainties for the future. But today, as its impact on daily life moderates, it now seems to be integrated into the daily context of buyers.
Attractive interest rates and easy access to credit make it easier to buy a home, even if prices are historically high. Generally speaking, the needs and the demand are there and notaries, particularly those established in the Grande Couronne, are optimistic.
It is to be hoped that these elements will be confirmed and that the market will remain fluid, making its contribution to the economic recovery currently underway.
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The Adrian Leeds Group®
P.S. The Living and Investing in France Conference in Nice starts Monday! Because I’ll be devoted all next week to this event and the Tour to Provence and the Occitanie following the conference, there will be no Nouvellettres® between September 27th and October 3rd. They resume on October 4th.
For those who cannot attend, but wish to obtain a recording, of all the sessions, please see yesterday’s Nouvellettre® to learn more.
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