Expert Insight, Breaking News, and Insider Stories on Real Estate in Paris
French remain confident in real estate market despite coronavirus
What effects have the current lockdown measures had on the state of mind of future property buyers in France? In conjunction with the Observatoire du Moral Immobilier (OMI), SeLoger surveyed more than 2,500 potential buyers for an exclusive study on market confidence.
Covid-19 crisis: 7 out of 10 French people are optimistic
Although the lockdown has put real estate activity on somewhat of a hold, a study conducted by SeLoger in partnership with the Observatoire du Moral Immobilier (OMI) indicates that a majority of French people remain optimistic about the success of their plans to buy or sell a home. “The market is on pause but optimism is still in play,” said Séverine Amate, spokesperson for the SeLoger group. In fact, the survey reveals that ”7 out of 10 French people are confident their real estate project will come to fruition in the next six months and 1 out of 2 French people will even get to work on it as soon as the quarantine ends.” It is also important to point out that only 13% of respondents plan to postpone the purchase or sale of their home until 2021. In general, 66% of sellers and buyers questioned say they are optimistic about the Covid-19 crisis.
Real estate projects postponed until the end of quarantine
Although the coronavirus has indeed temporarily thwarted the real estate plans of a majority of sellers and potential buyers, the study reveals that the quarantine has lead most French people to merely postpone these plans for the moment, and not renounce them completely. “For 8 out of 10 French people, the quarantine has only delayed their projects, whether they are buying or selling,” stresses Amate. Post-quarantine, this delay could lead to lead to further congestion in terms of transactions in and around large cities where supply does not meet demand.
According to Amate, “only 2% of potential buyers and sellers have abandoned their real estate project completely. 70% remain confident that it will be completed in the next 6 months and believe they will pick up where they left off by this summer. 52% are even ready to continue starting May 11.”
French people confident in their financial resilience
The economic impact of the health crisis we are going through is undeniable. As of April 20, 9.6 million workers are on short time, with a consequent reduction in their purchasing power. If the lockdown were to drag on, some could even lose their jobs. Nevertheless, the crisis seems to have had little effect on household financial confidence, according to the study.
“Overall, 58% of French people anticipate a general and gradual decline in the country’s standard of living,” notes Amate. However, 49% of future buyers are also convinced that the lockdown will have no affect on their purchasing power. “Only 26% expect their purchasing power to decline.” All in all, a quarter of active buyers and sellers are therefore confident that they will be able to maintain their financial capacity and stabilize, or even the improve, their personal financial situation.
The French are divided on whether prices will rise or fall
Changing real estate prices is another salient point to consider during this unprecedented time. According to the study, “55% of those surveyed believe that property prices will fall over the next six months and 40% think that prices will gradually decrease,” notes Amate. Although a majority of French people expect prices to fall by less than 10%, a third of them are instead leaning towards price stability.
It is striking to note that the results of the survey contrast sharply with those of a study conducted by the Observatoire du Moral Immobilier SeLoger last February. In this study, 46% of respondents were betting on price increases, while 45% figured the market would remain stable. At the time, of course, the idea of confining 11 million inhabitants to their homes was a thing of science fiction.
When asked whether the coronavirus is impacting budget estimates for their current real estate project(s), a large proportion of future buyers said no. “For 86% of the buyers questioned, the budget devoted to their real estate project has not changed since the lockdown went into effect,” says Amate.
An expected increase in interest rates
With the market at a near stand-still, how will interest rates be affected? “For 1 in 2 French people, rates will rise rather gradually, and for 1 in 3 French people, they should remain stable,” notes Amate. As for the borrowing terms and conditions, which had been tightened by the Banque de France and the Haut conseil de stabilité financière (HCSF) well before the beginning of the lockdown, 40% of the buyers and sellers questioned fear that they will become even stricter.