New data highlights six key trends in France’s property market

It includes the news that property prices fell across the country in the first quarter of this year

There is more evidence that France’s housing market is struggling
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The French property market’s Covid-influenced ‘golden age’ has ended.

This is the view expressed by French Notaires as it released its latest data on the state of the country’s property market.

It said the period of rising house prices, driven by low interest rates, had finished.

Its figures - compiled in a quarterly report that covers all non-new build house sales in the country - showed property prices are falling.

It is the most complete set of data covering house sales in France. But due to the time it takes to compile, it only goes up to March 2023.

However, there is preliminary data up to July and French Notaires have also predicted trends for the rest of the year.

The notaire data makes for negative reading for those looking to sell, but some see the end of the “golden age” simply as a return to the state of the market before being warped by Covid.

The end of the French housing market’s ‘golden age’

The number of housing transactions in France between May 2022 and May 2023 was 1,029,000.

That is down from around 1,180,000 registered in the year to May 2022.

In addition since August 2022, a month-on-month drop in house sales has been recorded.

At the end of 2022, the fall was around 5% each month. But this year it has accelerated, more than doubling.

For example, the number of housing transactions dropped 12.6% between April and May 2023, normally when the market is at its busiest.

“The deterioration in volumes can be linked directly to the inflationary context and the sharp and rapid rise in interest rates,” said French Notaires in its report.

It also said it was the end of a Covid-19 “golden age” for the housing market.

“The period of rising prices, boosted by abnormally low interest rates, is well and truly over,” it added.

House prices have definitively fallen

There has been much talk about falling house prices in certain sectors and regions, but this new data makes it clear the drop is being felt across the country.

There was a national fall in prices of 0.1% recorded between January to March 2023.

That compares to the previous quarter - October to December 2022 - that saw a 0.2% national growth in housing prices.

In the Paris region, the fall is even greater. House prices dropped 1.1% between January and March this year. The previous quarter saw a 0.4%.

Although the year-on-year trend shows an increase in housing prices, this is driven solely by increases in 2022, with all trends pointing towards a large drop in 2023.

This is seen comparing the May 2023 data set (showing a 4.9% growth in housing prices over the previous 12 months) to July’s (showing only a 2.7% increase).

Credit: INSEE / Notaires de France

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Paris region is hardest hit

The capital has been hardest hit by the drop, both in terms of house and flat prices, said French Notaires.

The French capital has seen “an increasingly marked deterioration in activity,” added the notaires “and falling demand will lead to further price adjustments.”

Preliminary data for July 2023 predicts year-on-year price drops of -4.8% for flats and -3.2% for houses. That is lower than any time in recent history – except the 2008/2009 subprime crisis.

The price per m² of a flat was €10,310 in the capital at the end of the first quarter of 2023, but the preliminary data suggests this fell to €10,090 this month (July).

“If the downward trend continues, the price could fall below €10,000 per m²” in the capital before the end of the year, the notaires added.

Other major cities also seeing falls

Although Paris makes for the bleakest reading for those who are looking to sell, other major cities are also seeing house prices fall.

“The vast majority of municipalities where prices of existing flats were still rising in the first quarter of 2023 would show stable or falling prices,” by July 2023, according to the notaire’s preliminary data.

“This is the case, for example, in Rouen and Nantes, where prices were stable at the end of March 2023, but are expected to fall by around 4% by the end of July 2023,” they said.

They also highlighted France’s third largest city, Lyon, where flat prices are expected to fall 3%, after a 1% year-on-year fall in the first quarter of 2023.

Housing prices in major cities – which saw a mixed bag of small rises and falls – in larger population areas were predicted to have seen drops in value and sales numbers.

“Sales are expected to fall by between 4% and 9% in Angers, Saint-Étienne, Nantes, Lille, Dijon, Toulouse, Rouen and Strasbourg,” the report added.

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Market ‘is lacking dynamic’ and new buyers are frozen out

Despite pockets of land – such as coastal areas – temporarily resisting the changes, the overall drop is inevitable.

“After having largely benefited sellers, the market is now turning around,” said the notaires, highlighting how the fall in house prices had made a purchase more attractive to would-be buyers.

At the same time, however, “The market has yet to find a new dynamic, as the sudden rise in interest rates has put a damper on buyers and pushed out first-time buyers, whose income levels are no longer sufficient to allow them to consider a purchase.”

“The pool of potential buyers has been largely reshuffled by the increasingly complex nature of borrowing, and the fact that French people have less money to spend on property,” the report added.

At the same time, a return to negotiation on house prices has been seen, with fewer buyers available for sellers.

It remains to be seen whether the fall in inflation – which the Banque de France predicts will begin in earnest after the end of the second quarter of 2023 – will bring more buyers to the market.

Drop in new housing loans

Driven by the increase in mortgage rates, a slight decrease in new housing loans offered by French lenders (such as banks) was seen.

Despite being €12.2 billion in February and March 2023, and rising to €12.6 billion in April 2023, in May it fell to €12.1 billion.

On top of this, the growth of outstanding home loans is slowing, with more loans finishing and yet to be replaced with new buyers taking out mortgages.

The rate of outstanding home loans saw a 3.7% increase in May, after recording a 4.1% increase in April.

This number is lower than for other countries in the eurozone, with France seemingly hit harder by the housing crash than other European countries.

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