Real estate: the French market about to settle, not sink

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So far everything is going well. This is the observation of observers of the French real estate market, at a time when many other sectors such as industry cannot say the same. The first sales figures published yesterday Tuesday seem to confirm this trend.

In the second quarter, the prices of old goods slowed slightly, increasing 6.8% in a year, or -0.5 points compared to the growth of the first quarter. Also, sales volume has weakened a bit. This quarter is still a very good harvest, especially in terms of price level »says about the national market Thierry Delesalle, president of the Statistical Commission of the Notaries of Greater Paris.

The national market stagnates

If we take a look at the real estate scene, France has shown exceptional vigor in recent years. The number of sales jumped from 876,000 at the beginning of 2017 to 1,157,000 in the summer of 2022. A rare dynamism, probably not sustainable. ” In the last twelve months, we have logically reached an impasse. It is true that the market is calming down in the provinces with a slight slowdown of 3% in transactions. But beware, the preliminary contracts do not collapse, especially in Paris and the inner suburbs. »reports Thierry Delesalle of Notaries of Greater Paris.

At the forefront of the transactions, the Parisian notary witnesses the consequences of the race to the provinces and houses after the confinements. He notices a ” investment ». During the pandemic, the market was wiser in Paris than in the provinces. For a year now, the inner periphery and Paris have been doing better », he points. But according to him, all the French who wanted to move have not yet done so. This explains his optimism about demand.

Recession: cold snap in stone?

However, these good statistics do not bode well for the future. Clouds hang over the real estate market, the same clouds that hang over the French and European economy. Starting with a general economic slowdown in the least bad scenario. Or a recession in the worst case. What to send a chill to the stone?

Surely there will be a phase of slight decline in case of economic stagnation. In these types of periods, prices historically tend to settle more than volumes. Prices should fall more in the big cities, where they had risen the most, than in the provinces and on the coast »anticipates Alain Trannoy, professor of economics at the University of Aix-Marseille.

Author of the book “The great return of the land in heritage” with Etienne Wasmer, the latter tempers the risk of collapse of the real estate sector. Even in a recession. ” The French market is resilient, at least more so than the United States or the United Kingdom. The French have more savings with a household savings rate of 17% »remember.

“Very acceptable” rates at 2%

The pandemic and fears about the macroeconomic situation have filled the French wool stocking. The destination that will be given to these savings, for example as a contribution when buying an apartment or a house, represents one of the keys to the market among other uncertainties. Potential buyers decide based on the mortgage rate offered to them. The average 20-year benchmark rate is close to 2%.

Rates are still very acceptable. At 2%, customers still go there. It is not the rate that stops the purchases but the files that are rejected by the banks. Due to the evolution of the usury rate (note: legal maximum interest rate that banks are authorized to charge during a loan), they fear that the loan conditions they offer will exceed the wear rate. They are waiting for the Banque de France to modify the usury rate. Meanwhile, loan files and purchase plans are put on hold. », explains Thierry Delesalle, notary of Greater Paris, who asks that the wear rate be updated every month and not every quarter.

Paris, safe haven

In the face of sky-high prices, it remains to be seen how much the cost of money will rise, which will determine buyers’ final decision. A credit crunch like the one in 2008 would inevitably lead to a housing market crash. The economist Alain Trannoy hardly believes in a sharp rise in the ECB’s benchmark rate, especially if Europe is on the verge of a “stalled recession” ».

The main reason for anxiety comes, according to him, from the other side of the Alps. Italy is (pre) busy with the elections that will constitute his future government. ” If the Italian right wing comes to power and pursues a let’s say “adventurous” policy, Italian debt rates will skyrocket again and there will surely be a new sovereign debt crisis in the eurozone like in 2011-2012. »warns academic Alain Trannoy.

In the early 2010s, the French real estate market suffered from the crisis. Property prices had plummeted by as much as 2% year-on-year in 2012… except in Paris, where national and international clients had consistently voted. The sovereign debt crisis had thus benefited the Parisian real estate sector, the “safe haven” par excellence.