French Real Estate Market: Surge in Sales and Prices

2021, should have broken all sales records, reveals the High Council of Notaries. Though there has been a euphoria, that is accompanied by a general increase in prices, the other side of the coin is: this inflation erodes real estate purchasing power…

Clearly, the real estate market is immune to Covid-19. This is shown by the figures released by the High Council of Notaries. In fact, 2021 has historically shaped up to be an excellent year, with no doubt a sales record. A euphoria that nevertheless hides concerns. “There is no more stock, everyone wants a house and the supply is not enough. This creates an imbalance between supply and demand, an imbalance that leads to a fairly sharp increase in prices” points out Me Thierry Delesalle, notary in charge of national real estate statistics at the Higher Council of Notaries.

A very good year. With just under 1,200,000 transactions over twelve rolling months (1,198,000 exactly at the end of October 2021), 2021 will be one of the best real estate years. Sales increased by +14.5% compared to the same period in 2019, in other words before the pandemic. “Absolutely remarkable progress” notes Frédéric Violeau, also notary in charge of national real estate statistics.

© Superior Council of Notaries

Change of mindset. More space, cheaper and better quality of life, this is the triptych on which the behavior of buyers is based. The health crisis and the development of teleworking have led the French to refocus on their essential needs, explain the notaries. As a result, this dynamism particularly benefits the less densely populated municipalities where house purchases have been on the rise since 2019. It is also a response from buyers to the high cost of real estate in large cities.

Prices rising everywhere. According to the High Council of Notaries, in over one year the prices of old apartments have increased by 5.2%. “They are increasing faster in the provinces (+7.5%) than in Île-de-France (+2.5%)“, says Frédéric Violeau. The responsibility for this inflation goes to the old house, the flagship product of this year. Its average price has jumped 9% in one year! In the regions this increase in individual housing is the strongest (9.4% in over one year), while it is limited to 7% in the Paris region.

The neighboring departments are attractive. Another consequence of which we have not yet measured the consequences: the departure of Ile-de-France residents (we are not talking about the exodus) in the departments bordering Île-de-France. In Eure-et-Loir and Eure, 27% and 35% of transactions are made by buyers from the Paris region, it has grown up 7 points in one year. A trend that drives prices up, buyers in the Paris region often benefiting from solid financial means.

© Superior Council of Notaries

Shadows on real estate purchasing power. The other side of the coin is that real estate purchasing power is eroding in all segments of the market. Despite lower interest rates, we bought smaller spaces in 2021. On the scale of France, for 800€ of loan repayment per month at the interest rate of 1.13%, the surface area of ​​apartments purchased is 50m2 (-4m2 in one year). For the individual, the trend is the same. For 1300€ loan repayment per month, the average surface of the houses that have been purchased is 140m2. Down 8m2 in one year and 14m2 in two years.

© Superior Council of Notaries

Are prices still rising in 2022? According to the preliminary contracts for the last quarter of 2021, we were heading towards a significant price increase. According to notaries, apartments would increase by 7.7% in Province but by 1.4% in Île-de-France. As for houses, the projections predict a continuation of the price increase of 9.6% for the province and 8.4% for Île-de-France. The Covid crisis continues to make its effects felt.

Source:   PAP.fr