French property: Analysis of the market

The analysis of the real estate market is derived from the French property marker report of notaires de France. It presents the real estate situation in France: trend and evolution of real estate prices.

Consult the french property market report in this interactive version

Change in shape of the real estate market

The volume of sales of older properties over the last twelve months reached 1,130,000 transactions at the end of May 2021, a record level since 2000. This volume is all the more remarkable because, even if it includes the deferral of sales not made during the first lockdown, it reflects, above all, the dynamism of the housing market throughout that period.

The trend highlighted in the previous quarter is even more apparent: if the number of transactions increases, it is in favour of a new typology of properties and toward geographical areas away from major cities. Some properties that were then responding to essentially local demand are now being sold to a wider range of users. We observe relocations, particularly to small towns and even to mediumsized towns (Barometer of real estate in medium-sized towns, Higher Council of Notaries and National Agency for Territorial Cohesion, June 2021).

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This was initially felt specifically for older homes around the capital, with Parisians showing a marked trend toward smaller cities, mostly located in adjoining departments. The new fact is that the figures for the notarial real-estate base show a similar trend in older homes in other cities: thus, around the Lyon metropolis, and as early as the second half of 2020, the Lyon residents oriented their departures more toward cities of less than 3,500 inhabitants located in the neighbouring departments (Isère, Ain, Loire), in greener areas, also probably more financially accessible. This desire for greenery, supported by the impromptu rise of remote working, seems to reflect a desire for “connected disconnection.”

This same analysis of the notarial real estate bases, carried out around Toulouse, reflects a similar progression, for the city of Toulouse as well as for the Toulouse metropolis, toward cities of less than 3,500 inhabitants, even if the Haut-Garonne residents do not tend to leave their department.

These movements remain reasonable, even if tangible. What seems to be a beginning of generalisation across French cities echoes the fact that in the second half of 2020, the French had a greater propensity to leave their home department than in the second quarter of 2019. The number of "departures" increased by 13% despite a higher number of transactions at the end of 2019 than at the end of 2020 (1,067,000) transactions compared to 1,024,000 transactions).

Unequal price impact

In the first quarter of 2021, the increase in the price of old housing in metropolitan France slowed to +1.4% compared to the fourth quarter of 2020 (provisional seasonally adjusted data), after +2.4% in the previous quarter.

Over the course of a year, the price increase also decelerates: + 5.9%, following + 6.4%. This is mainly due to a slowdown in the apartment market: 5% over one year compared to 6.3% in the fourth quarter of 2020. In houses, the increase is similar to the previous quarter: +6.6% over one year compared to +6.5% in the fourth quarter of 2020. The predictions from the pre-contracts in metropolitan France forecast, by the end of August 2021, an increase in the prices of apartments over a year slightly higher than that recorded in the first quarter of 2021 (+5.5% at the end of August 2021). The momentum already seen in the house market appears to be confirmed, with a significant acceleration of the price increase at the end of August 2021 at +8.9%.

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But these national trends are not indicative of the full reality of market developments and the pendulum effect. The steady and pronounced rise in house prices confirms the appeal to a greater need for space, especially for residents of large cities. But they export their home-buying power with them, which does not necessarily correspond to that of local users. This imbalances these markets upwards, generating abnormally high and not always justified prices.

On resonance, the start of departures from the big cities is causing a drop in price rises: for example, in the city of Paris, there is a plateau effect, as a result of a sharp drop in volumes (-14% in the capital over a year at the end of the first quarter of 2021). According to the indicators on pre-contracts, the price of apartments is expected to reach €10,720/m² in August 2021, an increase of 1% in three months, while prices are expected to stabilise (-0.2%) over the next year: but the upward pressure in recent quarters seems to have come to an end. Sales take place on average in three weeks in Paris, where, in particular in South Brittany, properties for sale have become rarer.

But, at this point, it is premature to argue that this trend heralds a lasting redistribution of the housing market, or stems from a fleeting phenomenon, more directly linked to the health crisis. But this change in property morphology seems to be widespread in the European Union, and even in England and Wales.

Interest rates still in support

Despite some fluctuations, interest rates remain low; the average interest rate for new home loans reached a new low of 1.15% in April 2021, and thus helps to sustain dynamic transaction volumes.

The recent recommendations of the High Financial Stability Council (HCSF) seem to reinforce the borrowing profiles on parameters that are more relevant to good banking practice already in place than to coercive measures.

An increase in rates would not break market dynamism: in fact, borrowers are aware that they are currently exceptionally low; no indicator suggests a sharp rise, so a reasonable increase in rates would not significantly alter the purchaserborrowers’ cash-flow effort.

The French morale does not deny this desire to invest, and is finally rebounding after a chaotic year, though still below its long-term average. The French now consider it less necessary to save, which can spur them to shift their spending toward well-being and a better living environment.

The mechanisms put in place by the public authorities, in real estate and elsewhere, helped to prevent panic. The morale and savings made during the lockdowns allowed many French to embark on a new home purchase.

But has the health crisis redistributed the cards? Or will the recent trend change the long-term consumption of real estate? Bricks and mortar has always kept a place of choice in the heart of the French. But today, it is no longer seen as an investment, a safe haven or source of return, but as a guarantor of quality of life, a sign of, perhaps transient, changes in consciences.

Property market: the new housing market

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