French property prices: indexes and maps
Prices for their part in no way reﬂect this situation! Paradoxically, due to the calendar, the statistical analysis at the end of the ﬁrst quarter shows insolently high scores: the prices of older properties in France rose more sharply: the INSEE index of older properties soared to +1.8% compared with the 4th quarter of 2019, after +1.3% and 1% in the previous quarters.
Over one year, the rise in prices also surged: +5%. Albeit traditionally more marked for apartments (+6.3% over one year), the rise in house prices (+4%) is tend-ing to catch up with the latter. The balance between prices of houses and apartments is being redressed.
Median price per sq.m. for older apartments in the 1st quarter of 2020
Median selling price of older houses in the 1st quarter of 2020
Property market: price's analysis
In Greater Paris, despite volumes trending downward, the prices of older properties are rising more quickly than in the previous quarters (+2.2%). They have continued to pick up over one year, particularly for apartments in Paris: +8% over one year in the 1st quarter of 2020. The French Provinces are not outdone, as they are also showing sharper rises: +1.7% in the 1st quarter, after +1.2% and + 1%.
This upward trend appears to be spreading to wider areas than previously, both for houses and for apartments. In this respect, areas in Western France have conﬁrmed the momentum observed in 2019 (in apartments, in the 1st quarter of 2020, +16% in Loire-Atlantique, +16% in Morbihan, +13% in Ille-et-Vilaine and +10% in Finistère). Most of the larger cities in the provinces have also shown upward trends on a greater scale compared with the previous quarter.
Should we see in these ﬁgures an anxiety-provoking paradox? This apparent imbalance between volumes in sharp decline and rising prices seems to be a cyclical rather than an endemic phenomenon. The main difﬁculty lies in the confusion that may arise from comparing pre-lockdown prices with volumes immediately after the lockdown.
The milestone mentioned in the last market report has indeed been reached: the technical bounceback has taken place, and transactions are recorded at pre-lockdown prices. Similarly, pre-contracts recorded during and immediately after this period still reﬂect the attitude of potential purchasers, having references and committed to their pre-lockdown decision to purchase. These ﬁgures should thus be treated with great cau-tion and as they stand are a yardstick against which transactions from September 2020 will be measured.
However, an analysis of the latest pre-contracts seems to point to a lull in this general bullish trend: the price forecast in mainland France for the 1st quarter of 2020 appears to be continuing to rise in August 2020, but at a slower rate, both for apartments (+1.1% against +2.3% in the 1st quarter of 2020) and for houses (+0.3% against +1.5% in the 1st quarter of 2020), even if these indicators should be treated with caution, not least on account of the lower number of pre-contracts recorded during lockdown.
The forthcoming summer period will unfortunately not provide more cases, so that we will have to wait until September to conﬁrm any trend. One should note however that this slowdown in price rises better ﬁts more measured volumes, excluding lockdown-related effects. This trend is reassuring in that it supports the assertion of sounder property fundamentals. By neutralizing statistical deviations connected to the health emergency, which are totally unrelated to property-related factors, the market appears to be showing signs of a natural slowdown in price rises, consider-ing slightly falling volumes. Indeed, this trend prompts us to consider that this mid-year point, setting aside the calendar, is a veritable cycle in the property market, as the ultra-dynamism of 2019 appears to have somewhat subsided.
Loans - Banque de France ﬁgures
In parallel, banking activity has continued without interruption. Admittedly, growth in home loans has slowed down, but the banks have continued to arrange loans for purchases initiated before the lockdown. It goes without saying that during the lockdown the proportion of renegotiated loans rose sharply, while the number of new loans fell at the same rate as new pre-contracts. Excluding renegotiated loans, home loan interest rates are still historically low at 1.15% in April. Halfway through the lockdown we noted a few higher rates, but apparently this phenomenon has died down and remains exposed to the health crisis. The trend, bullish in May, levelled off in June.
These slightly negative rates should allow the banks to charge home loan interest rates under 2% on a lasting basis, unless they decide to hedge against the risks they are urged to take by the authorities vis-à-vis companies with higher returns on property. One should not remain indifferent to this argument, as the ECB has also urged them to do so since the end of last year, and the injection of credit and liquid assets into the real economy over the last few weeks could also prompt them to do so. Apart from this risk adjustment, the incentives to prudence of the banking authorities in this unprecedented context should be reassuring in that they safeguard access to credit and will guarantee an optimized cost thereof, thanks to best risk control: less risk means lower rates.
Consult the french property market report in interactive version
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