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Market Update: A look back at 2018

Closing out 2018 and heading into the new year, MeilleursAgents has published the 108th edition of its monthly analysis on the residential real estate market in Paris, Île de France, and France’s largest cities.  The following includes trends observed since the beginning of November as well as a recapitulative of this past year.


Key Points:

  • The return of inflation has allowed households to actually earn money by going into debt: real borrowing rates are negative at -0.7%, an exceptional market situation.
  • Solvent households that have understood the situation are more than motivated to carry out new real estate projects.
  • As such, preexisting property prices rose almost everywhere in France in November, including in the 50 largest cities in France (+0.2%) and in rural areas (+0.1%).
  • Lyon continues its strong increase at +0.9% in November. Other major cities recorded increases of between +0.1% (Marseille) and +0.4% (Montpellier).
  • Only Lille -0.2% and especially Bordeaux (-0.4% in one month or -0.9% since the beginning of the year) have seen their prices fall.


Real Estate Price Index (Indices des Prix Immobiliers, or IPI) as of December 1st, 2018 throughout France.

IPI Decembre 18


Real Estate Price Index (Indices des Prix Immobiliers, IPI) as of December 1st, 2018 in Paris solely.

IPI Site


Return of inflation in France: going into debt saves

In the midst of a purchasing power crisis, the real estate purchasing power in France’s ten largest cities has been on the rise for the past 10 years.  In fact, in taking out a loan to acquire their housing, French buyers ultimately increase their wealth due to negative real rates. Currently, borrowing rates posted and used by banks remain stable at an ever-low level of 1.55% over 20 years. The return of inflation (2%), however, is changing the game yet again, allowing households to earn money by going into debt.

For example, a household that now owes €200,000 at 1.55% over 20 years will have a monthly mortgage payment of €968. Assuming that inflation remains stable at 2.2% over the term of the loan, the monthly payment of €968 would only be worth €625 in real currency in 20 years, a decrease of 35%. All in all, the happy owners would have finally repaid only the equivalent of €188,000 at the end of their 20 year term, compared to €233,000 without inflation.

The real borrowing rates are therefore negative, at -0.7%, as shown in the graph below.


Evolution of 20-year borrowing rates, inflation, and real rates 

Source: INSEE – Indices des prix à la consommation – Banque de France

Creditworthy households that have understood the situation and all the benefits they can gain from it are thus entering the market. This is certainly affecting prices and contributes to further boosting the market at the end of the year in a context of stable unemployment.


Prices on the rise in Paris and in France as a whole

Prices in Paris rose by +0.1% in November, and by +5.3% since the beginning of the year. The average price of les petites surfaces (studios and two-room apartments) increased by +0.5% in November (+6.4% since January 1st). Here we see the full effect of negative interest rates, encouraging investors and first-time buyers to rush to this type of property.

In addition, real estate activity remains strong in Paris with an average selling time of 51 days (-1 day compared to the end of October). This market fluidity is supported by a Real Estate Tension Index (Indice de Tension Immobilière, or ITI) of 23%, meaning there are currently nearly a quarter more buyers than sellers on the market. It will be interesting to monitor the evolution of demand with the reinstatement of rent caps in Paris.


Prices increase in Paris’ suburbs

Price increases in la petite couronne, or Paris’ immediate suburbs, are driven by a strong increase in the Seine-Saint-Denis department (+0.8%), primarily concentrated in the most attractive and dynamic cities offering connections to public transportation.  This is a real investors market for Parisian residents (+8.5% in Montreuil and +5.5% in Saint-Denis since the beginning of the year).

Prices in Ia grande couronne rose by +0.2% in November, with an increase of +0.6% in Seine-et-Marne, +0.5% in Val-d’Oise, stable prices in Yvelines, and a slight drop (-0.1%) in Essonne.

Price Evolution in the Paris Region and in Parisian Arrondissements

Carte Paris IDF dec_site


8 out of 10 large cities note price increases

Prices outside of the capital and its suburbs are also on the rise, with 8 out of the country’s 10 largest cities witnessing increases in November. On average, prices in these 10 cities increased by +0.3% in November, or +3.4% since the beginning of the year.

In France’s top 50 major cities, however, the trend is also apparent (+0.2% in November, or +1.7% since the beginning of the year).

Lyon is still at the top of the price increases (+0.9% in November alone, +8.2% year-on-year). The effect of negative rates is fully felt here, in an economic and social context that is favorable to investment and borrowing.

The same trend was observed in Montpellier (+0.4%), Toulouse (+0.3%), Nantes, Strasbourg and Rennes (+0.2%), and Nice and Marseille (+0.1%). Only Lille (-0.2%) and especially Bordeaux (-0.4% in November and the only city reporting price decreases since January 1st: -0.9%) are distinguished by negative price variations.


Real Estate Price Index in all of France as of December 1st, 2018

Carte top 10 dec_site


Selling time almost twice as long in Nice as in Lyon

  • Selling time increases in Bordeaux reflect market changes in this city: while in 2017 it only took 45 days to sell a property here, today it takes nearly 60. 
  • The Real Estate Tension Index (ITI) in Lyon (28%), Toulouse (28%), and Nantes (26%) reflects a dynamic buyers market.
  • Over the last 6 months, sales delays have increased and ITIs have slightly decreased almost everywhere. This is due to a seasonal effect contributing to a less active market than in spring.


Selling Time (in days) and Real Estate Tension Indexes in major French cities as of December 1st, 2018

Carte Indicateurs dec_site


Buying power in major French cities

  • In 8 out of 10 of France’s largest cities (not including Paris), buying power has increased by 10 m2 or more over the last ten years.
  • Despite a strong increase in prices over the last ten years in Paris, Lyon, and Bordeaux, overall buying power has increased throughout the country due to the support of low interest rates.
  • According to the INSEE, 36 m2 is the acceptable minimum size of a decent living space for a two-person household (18 m2 per person).  Thus, purchasing power in Paris, Bordeaux, and Nice remains relatively low, at less than 36 m2.


Real estate buying power as of December 1st, 2018 + overall buying power trends over the last ten years

Carte gros plan dec_site

Other indications

Nearly one million home sales in 2018?

Leading real estate loan broker CAFPI estimates that a yearly total of nearly one million home sales could be reached in France before the end of the year. This would exceed the 960,000 transactions recorded (+14%) in 2017. The broker’s forecasts are based on dynamic numbers from the month of October and on interest rates that remain low, encouraging borrowers to take advantage of them before a possible recovery.


30-40 year olds represent more than a quarter of all real estate buyers

Century 21 also points to a possible record number of transactions in 2018 after having observed an extremely promising third quarter of 2018. According to their data, 30-40 year olds are making the most real estate purchases this year (usually acquiring a main residence). In total, 46.1% of buyers in France are under 40 years old, and more than 25% are between 30 and 40 years old (+7.4% over one year).


Increase in the share of buyers over 40 years old

In addition, both CAFPI and Century 21 have seen an increase in the proportion of 40-50 year olds and seniors among buyers. For these age groups, real estate purchases are often a way to invest for retirement.



Source: Immobilier ancien : vers une année record en 2018 ?


Source: Baromètre national des prix de l’immobilier au 1er décembre 2018 – Un marché de l’immobilier toujours dynamique grâce à des taux d’emprunt réels négatifs

Photo: Wikimedia Commons

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