Expert Insight, Breaking News, and Insider Stories on Real Estate in Paris
December real estate reveals a slowdown in prices
At the national level prices have indeed stagnated throughout the country (0%). The rural areas are the only places with an increase (+0.5% in November) thanks to the holding interest of investment groups and the desire for home projects. The rest of the market is sealed off by the apartments whose prices are falling in 58 departments. This current pause in the evolution of older property prices across France following a gradual slowdown observed for seven months now. Last May prices rose by +0.8%, in June and July they only increased +0.5%. In August, they barely recorded +0.3% increase and, in September and October, they plateaued at +0.2% and +0.1% respectively. If this stagnation appears as the logical continuation of a landing phase, it is nevertheless part of a seasonal context, November and December are traditionally the least active periods for the estate market.
Whether in 2019, 2020 or 2021, the evolution of prices for older construction, during the fourth quarter, are still experiencing a slowdown compared to that recorded during the previous semesters. Thus, last year, the variation was +2.5% in Q1, +3.6% in Q2, +1.3% in Q3 against only +0.6% in October and November. In this respect, 2022 is therefore not exceptional (+1.5% in Q1, +2% in Q2, +1% in Q3 and +0.1% in October and November).
Average price per m²
Paris 10,312 €/m2 (-0.5%)
France 3,206€/m2 (-0%)
Evolution of prices over the month of November:
Prices dropping in the cities
The drop in prices in the ten main French cities has really kicked in. At the beginning of October, there were three cities that dropped, but by the beginning of November, there were six, now they are eight! While Lille and Marseille remain green with respectively +0.7% and +0.8% increase over the last thirty days, the Top 10 cities’ rates are down -0.1%. This is unheard of since 2015!
- Nantes (-0.1%)
- Lyon and Nice (-0.3%)
- Toulouse (-0.4%)
- Montpellier (-0.6%)
- Bordeaux (-0.9%)
- Rennes (-1%)
- Strasbourg (-1%)
- Paris (-0.5%)
Apartment prices have fallen -0.1% in 1 month
The Real Estate market is entering a new phase after years of euphoria slightly overshadowed for two years by the health crisis and the growing difficulty of access to credit.
The vast majority of the Top 10 cities showed only a slight change in prices since January (+0.7% in Toulouse, +2.1% in Strasbourg, +3.1% in Lille or even +3.4% in Nantes), the prefecture of Hérault (+7.1%) held the shock and remained the only one to follow the upward momentum held by Marseille (+12.3%), though it has just fallen into the red. A first alert that may not be trivial if the extension of the deadlines for sale observed in the town since three months (+5 days) raised fears of a trend set to last.
Another metropolis likely to see a price drop: Bordeaux. For the record, at a time when prices were just starting to go up, it recorded the fastest increases. But it is also currently experiencing the sharpest decline (-2.4% since January).
Is it still a good time to buy?
Older Construction prices are at their highest throughout France and the borrowing rates have increased significantly in recent months. The question of entering on the market today is more than legitimate: is it better to wait for the price to drop even if there may be a rise in borrowing rates in return?
The world has changed.. Still want to buy your main residence?
In the long term, it is always more financially interesting to buy your main residence than to remain a tenant. However, the amortization period evolves according to the conditions of the market and the economic situation. During the previous cycle, the depreciation period in France was particularly weak: in January 2022, it only took 4 years to amortize the various costs related to the purchase and therefore make the acquisition of your main residence more interesting than a rental. Now the world has changed, buyers should be aware that the commitment they make today by becoming owners is stronger than a few years ago. In the sense that it now takes them no longer four years but eight years on average to amortize their acquisition. This duration will fluctuate according to the evolution of real estate prices (increase if the bearish cycle persists, fall if a bullish cycle restarts).
Is waiting to see still a good strategy?
Rates are expected to rise by at least one point in the next six months. But, while the European Central Bank has raised its rates by one and a half points since July 2022, the mortgage loan rates practiced in France only increased by 0.5 points in the same period. Mid-2023, it should therefore be difficult, except for excellent profiles, to borrow over 20 years below 3.5%. For buyers tempted to postpone even six months, the observation is simple: to compensate for this increase in interest rates, real estate prices would have to fall during the same period of -8.7%, which seems unlikely. As proof, during the last bearish cycle crossed by France between 2011 and 2015, the market lost -7%… But in the space of four years.
But, is it wise to buy now?
For buyers who want to secure their purchasing power, it is more interesting to buy now subject to planning for a better deal in the future. The rise in rates of interest is expected to continue in the next 6 months and prices will not adjust enough to make up for it. Waiting longer can therefore put the ability to enter the market, except to profoundly modify the project or the structure of its funding. A tip for those who wish to take the plunge: it must be kept in mind that the balance of power between buyers and sellers has clearly reversed and in favor of the buyers! You have to take advantage of it by no longer hesitating to negotiate the prices of goods which, for the first time in years, are struggling to find takers. Each euro gained on the sale price brings closer the profitability horizon of the real estate project!
When is it a good idea to wait?
For buyers with a less constrained financial situation, other factors may mean a wait-and-see is the best approach. Indeed, while the real estate market is high, waiting for an adjustment of the price can reduce the depreciation period. The risk of borrowing with rates so high is less problematic because owners will always have the possibility of negotiating their loans in order to take advantage of a possible rate cut in the future, once inflation stabilizes at lower levels.
Be that as it may, there are many uncertainties hanging over the market today. So much that they will not be lifted, they will not only fuel the new bearish cycle into which it enters little by little but also make its access more difficult.
Source: Meilleurs Agents December 2022