Expert Insight, Breaking News, and Insider Stories on Real Estate in Paris
Market Update: Summer 2020
The Paris real estate market has quickly recovered after an uncertain first half due to coronavirus.
The first few months of 2020 heralded an exceptional year for Paris real estate, especially after the momentum of 2019 with a record 1.07 million sales. At the end of April, however, with the coronavirus, the number of transactions over a twelve-month period stood at 973,000, 8.6% less than at the end of December 2019, according to Fnaim.
From May 11 onward, however, real estate agents and listing platforms witnessed a huge surge in activity. After a 40% drop, industry leading SeLoger recorded a 60% increase in activity in June, returning to the same number of listings as published before the crisis, “with, however, more demand for houses and a particular focus on outdoor spaces,” observed Bertrand Gstalder, the CEO of SeLoger. “According to our latest study last May, buyer confidence is here: 75% are optimistic about the completion of their real estate project within six months. This is a necessary, if not required, element for a sustainable recovery,” comments Gstalder.
In their study published earlier this month, Century 21 also attests to this phenomenon. Even though sales numbers had fallen by 30% due to the crisis, the curve is reversing, with a 10% increase in sales agreements in June 2020 compared to the same period in 2019.
New price record in Paris
The price per square meter in Paris has hardly been affected by the crisis, rising by a further 7.4% to an average of 10,670 euros, beating its own record once again. But the market in the Paris region is changing, driven less by investors, who are being pushed away by the setbacks of seasonal rentals and tourist rentals, and more by households looking for a comfortable primary residence. “There has been an increase in purchases for primary residences (from 57.7% pre-lockdown to 63.5% post-lockdown), with, on the other hand, a decrease in rental investments (from 31.3% to 29.2%),” explains Laurent Vimont, President of Century 21. “When we buy to live, we generally buy bigger,” he concludes.
Contrary to what had been predicted during quarantine, there has been no exodus of Parisians leaving for the countryside or the coast. On the contrary even, people are buying bigger and aren’t hesitating to borrow more in order to make this a possibility.
Increased surface area
The average size of property purchased in Paris is thus increasing, and with this, the average price of a transaction. According to Century 21, average surface area has increased from 50.8 m² pre-quarantine to 56.2 m² post-quarantine. Between June 2019 and June 2020, average surface area increased by 10 m², all while prices continued to rise (7% in a year).
The cost of these additional square meters has impacted mortgage lending, with Parisians borrowing more over longer periods of time since the end of quarantine. The average price of a real estate transaction has thus increased by +17.2% between the first half of 2019 and the first half of 2020 to reach, according to the Century 21 study, €547,022.
Interest rates down
Good news for these real estate buyers, though: mortgage rates have fallen in time for summer. After a slight rise between January (1.12% on average for all durations) and May (1.25%), rates have, against all expectations, fallen again over the last two months.
“This is atypical since, historically, during the summer period, banks tend to stabilize their rates to calm things down before September’s recovery,” notes Empruntis. For the month of July, banks show a decrease of 0.10% to 0.15% on average, and even 0.30% in some cases, compared to June. “Borrowers, in the majority of cases, can plan for a mortgage rate at 1.20% over 15 years and 1.30% over 20 years,” details Empruntis. The best profiles can even negotiate rates at 0.75% over 15 years and 0.90% over 20 years.
As quarantine halted many real estate transactions and, as a result, many loan applications, financial institutions are more inclined to grant attractive rates to get the machine going again. The only continuing problem is the tightened borrowing conditions suggested by the HCSF last December, which has limited some buyers, who don’t have the best profiles, from realizing their real estate goals.
Sources: Depuis la fin du confinement, les Parisiens achètent des logements plus grands; Crédits : les taux repartent à la baisse; L’immobilier se rétablit vite depuis le déconfinement; Crise ou pas les prix montent encore