This Paris Life

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Activity is slowing down but real estate prices continue to rise!

Despite a substantial drop in supply and demand, the cost of property, especially in almost all of the country’s major cities, continues to rise. In France, becoming a homeowner costs 5.4% more than a year ago and a drop in prices is seems unlikely to happen anytime soon.


An increase in real estate prices which remains at more than 5% over 1 year


Regardless of whether the strong recovery experienced by post-lockdown sales is more akin to a technical rebound than a real recovery, one thing is clear : the French real estate market has not collapsed and prices continue to rise. Over the past twelve months, the average price of “un bien dans l’ancien” in France has increased by 5.4% to € 3,697 per square meter. By comparison, this is 1.1% more than in 2019, at the same point of the year. But what has caused this persistent increase?, asks Michel Mouillart, spokesperson for the LPI-SeLoger barometer. The answer lies in the fact that wealthy households have supplanted first-time and lower income buyers, who have been sidelined by the tightening of the conditions for granting real estate loans by Banque de France. In fact, while activity has declined and there are fewer buyers on the market, their higher real estate purchasing power means that the few properties being sold are those of a higher value.


In big cities, house prices are increasing


Has the period since Covid lock-down led to a rise in property prices? So it would seem. As Michel Mouillart points out, “while prices fell by 12% last January and February in large cities”, the increase is now omnipresent. Among towns with more than 100,000 inhabitants, only the price per square meter in Aix-en-Provence has fallen. On the other hand, it is interesting to note that, since the lock-down ended, the downward trend that affected some cities like Limoges or Saint-Étienne seems to have been reversed. As for the property prices in Bordeaux which, after increasing substantially for a while there, slowed down, only to now be once more on the rise (+ 2.4% over 1 year).


On the outskirts of Bordeaux and Strasbourg, demand is growing


Boosted by a limited supply and the close proximity to numerous amenities (transport, shops, government offices, etc.), the demand for housing located in city centers has traditionally driven up prices. As Michel Mouillart points out, this is the case “in the metropolitan areas of Lyon, Nancy and Nantes”. But in Bordeaux, Rouen, Strasbourg and Toulouse, the rule is reversed, “demand is stronger on the periphery than in the center”. This phenomenon (shifting demand, growing appetite for single-family homes) perfectly illustrates the changes in the expectations of the French regarding their housing.


Slim margins of Negotiation


In France, house prices have never been so little negotiated. While demand has shifted away from metropolises in favor of medium-sized towns, the margins of negotiation are razor-thin both in “highly urbanized regions” where markets are tight and – and this is new – in regions “usually considered to be quieter (Franche Comté, Lorraine, Picardy)”. And for good reason, there are now many buyers who give up negotiating and pay the “advertised price”.


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