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
Property market conditions as of 30 June 2020: a new milestone?
A few weeks ago the French property market report for the ﬁrst quarter of 2020 was ﬁnalized in a climate of heightened uncertainty. However, eager to address the public's legitimate questioning in these unprecedented times, but just as anxious not to lapse into preaching or undue optimism or pessimism, we proposed a forecasting exercise making a distinction between the potential different periods of recovery of the property business on the one hand, and the conceivable scenarios for each of them on the other. Given that timeline, it would seem appropriate to continue this exercise in the light of the data collected since then.
Initially, the events predicted for the early post-lockdown period indeed occurred: we have indeed seen a sharp recovery, startling as far as volumes are concerned. But as already stated, this is no more than a technical bounceback, merely the completion of deals initiated before the lockdown. As such, it has not really altered the economic outlook and has not erased the roughly two-month period of inactivity from 17 March to 11 May 2020: the volumes recorded in April 2020 totalled 973,000 transactions over one year, thereby seeing the annual volume of transactions fall to roughly the same level as that observed in February 2019; the one-year change in volumes of transactions was negative (-1.2%) for the first time since mid-July 2015. This negative trend was expected and will not surprise observers of the property market. It is not correlated with factors speciﬁc to this market but, as we have seen, is highly dependent on external factors.
That said, it is nonetheless interesting to examine these figures more closely, in order to detect trends more specific to the property market itself. In that respect, the ﬁgures recorded as of the end of March are illuminating: they reveal an admittedly high number of transactions (1,037,000, after 1,065,000 transactions at the end of December 2019), but nonetheless in relative decline. Disregarding the health emergency, volumes had shown a slight downward trend. This should not be unduly worrying, as the number of transactions had been rising steadily for several years. Given the favourable trend in the property sector at the beginning of the year, we could reasonably have assumed that the property market had peaked. This trend was conﬁrmed in Greater Paris, logically more pronounced: in Paris, sales volumes for apartments over the last 12 months (from April 2019 to March 2020) fell by 8% compared with the previous 12 months. If we look just at the 1st quarter of 2020, transactions in the capital fell by 23% compared with the 1st quarter of 2019. This comparative exercise makes a clearer distinction between the impact of the pandemic and the general trend in the volumes of property transactions.
To sum up, and logically following on from what had been anticipated in the previous quarter, the health crisis will result in a 10-month year more or less in terms of volumes, correlated with a more general trend towards touchdown in the rising number of transactions. It is highly likely that the upturn in volumes next September will conﬁrm this trend, all other factors being equal.
Changes in the annual volumes of older properties in the period 2000/2020
Number of sales of older properties over 12 months from January 2019 to April 2020
In the 1st quarter of 2020, the annual volume of transactions started to show a slight decline, albeit still at a very high level: in February 2020, the number of transactions completed over one year is estimated at 1,068,000, for 1,073,000 at the end of January 2020. In April 2020, the annual volume of transactions fell well below one million. Its trend over one year is negative (-1.2%), which had not happened since mid-July 2015. It returned to a level close to the February 2019 level, standing at 973,000 changes of ownership over one year.
In the medium term the state of the property market remains unknown; the mechanical carry-over effect will not dispel the inevitable and brutal after-effects of the virtually total shutdown of the property sector for many long weeks. The number of property sales may only return to its pre-crisis level at the end of 2021.
What can we expect of the forthcoming return to work in September?
As stressed in the last market report, the resilience of the property market so far is noteworthy: despite the threats posed to the job market by the health crisis in the short term, and the inevitable loss of potential buyers that this entails, notaries in most regions of France currently conﬁrm the public’s very strong appetite for property purchases, which can at times verge on the irrational, as some potential buyers who can ﬁnancially afford it wish to complete their purchase as quickly as possible. The explanation takes many forms, including a change of home after the lockdown, safeguarding’ one›s savings in response to the convulsions of the ﬁnancial markets, the fear of new taxes or even savings made during lockdown that reveal an additional “contribution”. Even in a world that has become distrustful, even in the face of ﬁnancial markets that have somewhat revived, this would tend to conﬁrm that more than ever the French have a keen appetite for bricks and mortar and the security it affords them, both in terms of investment and of return, and its capacity to provide additional income, which they will no doubt need sooner or later. In this respect the conﬁdence of households has clearly been restored, after a historic drop during the lockdown: according to INSEE, in June the proportion of households believing that the time is right to make major purchases has increased signiﬁcantly and is back to its long-term average1, after 5 consecutive months of decrease… The morale of the French had been severely shaken by strikes and social unrest, but it would appear that the pandemic has rather had a cathartic effect and that the population is henceforth more willing to believe in its future. Nonetheless this rebound in conﬁdence has taken place in full awareness: the French voice their fears regarding rising unemployment. This cautious conﬁdence, aware of the environment and conducive to fulﬁlling home purchase plans, cannot be understated. The refocusing of the French on their essential needs, revealed by the health crisis, seems naturally to lead them to consider the quality of their home (possibly combined with new remote working tools) as a factor of paramount importance, even more so than it traditionally used to be: a life plan is often underpinned by a plan to buy a new home. In that respect, the possible levelling-off of prices in the short term is a factor that could conﬁrm the intention of buyers to purchase.
Consequently, the prospects announced in the previous quarter can be conﬁrmed, and unless we are totally overwhelmed by a global economic disaster and/or health crisis, we can stress the fact that the property-related factors we have analysed, given the predicted levelling-off of prices and admittedly limited yet more sustainable volumes, will ensure the requisite resilience of the market.
Autumn 2020 will mark a new beginning, even more so than usual.
Property market: the new housing market
- I want to buy an apartment. My bank refused my loan. Can I ask the seller a staggered payment of the selling price?
- I buy a property for which the mandate of sale provides that the payment of real estate agency commission is the responsibility of the seller. Why is this commission included in the base for calculating notaire fees?