France has become a property buyers’ market in many areas, with prices stabilising or dropping and it is set to continue.
Buyers who do not need a loan, or just require a small one, are in a strong position as mortgage rates are predicted to rise to around 5% this year, limiting the pool of potential buyers and pushing prices down.
Estate agency network Century 21 says that this, combined with inflation, saw the average French household’s ‘property purchasing power’ drop 18% from summer 2022.
‘No-one knows exactly how low prices will go’
Property-selling coach Maylis Guinebert said: “We are currently basing price estimates on what homes were selling for two or three months ago but we can imagine there is going to be a 10% price drop, depending on area.
“It’s in flux and no one can say for sure if it will settle at a five, 10 or 20% fall.”
Achieved prices already fell in some areas this spring – for example, non-new build houses were down 2.8% year-on-year in Montauban (Tarn-et-Garonne), 5.7% in Nîmes and 0.9% in Brest, data from French notaires show.
Similarly, flat prices were down 1.3% in Caen and 0.6% in Nantes.
Buyers balance falling prices with rising interest rates
Property spokesman for the notaires Edouard Grimond from Lille said: “There has been a trend towards fewer sales across France. We are starting to see a marked slowing down of prices, and lowering in some sectors, which was not as clear before summer.
“This is strongest in Paris. Although prices are holding up in the most sought-after holiday resorts and very desirable locations.”
The fall is being felt more in medium-sized towns than in cities, apart from Paris.
“It is not necessarily the best moment to sell because there is more risk of price negotiation.
“For buyers, as long as they’re not in a rush to buy, it could be a chance to make the most of that and negotiate, but as each week is potentially seeing a rise in interest rates, it’s a balancing act for those who need a loan.”
Interest rates have quadrupled in two years
“We don’t know when this is going to stop and there is likely to be a difficult start to 2024.
“At the same time, property in France goes in cycles: it rises and drops, but it always ends up getting going again.
“We had reached a record in sales and are now dropping to a more ‘classic’ number.
“Property here is still a safe investment and those who don’t need to sell generally do not lose money long-term.”
Non-residents continue to buy second homes
Notaires’ figures show that foreign non-residents have continued to buy second homes in increasing numbers since 2020. While the proportion of Britons has slowed, they remain the largest English-speaking group: 17% of the sales in 2022, compared to 35% in 2015.
Prices in many coastal areas, such as Brittany, Normandy or Vendée, rose during the Covid period as city-dwellers looked for more space, but Mr Grimond said that “away from the big seaside resorts, you can find areas that remain affordable”.
Among the coastal regions, Normandy and Brittany have the lowest prices, followed by Occitanie and Pays-de-la-Loire, a report by the leading estate agency federation Fnaim shows.
Its president Loïc Cantin said: “We are likely to see a reduction in sales of 17%-18% this year (we predicted 15%) and price reductions always follow, which we’ve been seeing since March. It’s happening subtly, but not everywhere.”
The second-home market is less affected as there are more cash buyers, he said.
Paca in the south and many coastal areas have so far kept their value, and areas popular with retirees are also likely to reduce less due to an ageing population with cash available.
Interest rates could rise again to curb inflation
Mr Cantin said interest rates are linked to those set by the European Central Bank, which intends to increase them again as an anti-inflation measure.
“The government wants to get inflation to 2% and we’re not there yet. The rates could rise again next year, though I hope they will stabilise and we will return to a similar property sales volume as 2017-18.
“But prices will fall, especially in those areas where they had previously increased the most.”
Asked which zones are likely to have attractive prices for foreign buyers, he said: “France is beautiful, once you get away from its motorways.
“There are heavenly little spots all over: villages with inexpensive property, whether in Cantal, Creuse, Corrèze or Tarn.
“It is best to choose because you love the surroundings.”
However, it is hard to find bargains if you want a sea-view.
He added: “In the 1970s-1980s people were looking towards the Riviera for sun, but today Brittany, in a good season, has temperatures of the Riviera in 1960, which makes previously neglected areas more desirable.”
He advised sellers to be patient. “Until recently, you could sell in 30 days; today it’s 90-120 days. If it’s not sold in six months, lower the price.”
France usually follows US trends
As for the months ahead, Ms Guinebert said: “What happens in the US usually happens in France a bit later on, and prices have gone down over there.
“Will it be a ‘collapse’? It’s too early to say. But we are going towards a crisis, when you see the cost of materials and the cost of living constantly going up.”
Mr Cantin said the US faced 7% interest rates, but so far any price drops were modest, linked to a lack of supply.
US property site realtor.com noted 0.9% year-on-year drops in June and July but a slight rebound as of mid-August (up 1.1% year on year). The Halifax said prices in the UK year on year were down 2.6% in July.
Two-thirds of French mortgage applications unsuccessful
Banks are reported to be getting tougher on approving loans to buy second homes.
More than two-thirds of applications are currently unsuccessful, according to a study by mortgage broker Pretto.
It can help to look into letting the property when you are not using it and to tell the bank so it sees it as a source of revenue and not just expense, says property website seloger.com
Mr Grimond said that, for non-resident buyers, it can help if you agree to a mortgage with hypothèque where the loan is guaranteed against the home.