This Paris Life

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Signs of improvement in May, but no real Spring.

Introduction: Despite a slight upturn in the housing market in May, Spring 2023 in France fell short of seasonal norms. While the nationwide prices stabilized, they lacked the usual dynamism associated with this time of year. This article explores the recent trends in the housing market, highlighting areas of improvement and concerns that continue to persist.

Slow Growth and Decline in Paris: In May, prices in France experienced a stabilization with no significant growth (+0%). However, a closer look reveals that some sectors, like rural areas (+0.8%) and the top 50 communes (+0.3%), saw slightly more activity. Nonetheless, when compared to previous years, the spring performance was lackluster, with weaker price trends observed since March. For instance, in 2021, the fifty largest municipalities (excluding Paris) experienced a spring price increase of +2.9%, a considerable difference compared to this year’s +0.3%. Similarly, rural areas witnessed a decline from +4.3% in spring 2021 to +1.6% in spring 2023.

The Top 10 Cities Show Signs of Recovery: May brought some relief to France’s ten largest cities (excluding Paris) as they witnessed a modest growth of +0.3%. Seven of these cities saw positive growth, including Toulouse, Montpellier, Strasbourg, Lille, Rennes, Marseille, and Nice. However, Nantes, Lyon, and Bordeaux experienced price declines of -0.3%, -0.4%, and -0.5%, respectively. The high price levels in these cities, combined with limited purchasing power and rising mortgage rates, may explain the challenges faced in these markets.

Mixed Results in Other Regions: Apart from Gironde and Bas-Rhin, which saw greater price declines in the second quarter, other regions showed improvements between the first and second quarters. Nice, Rennes, Lille, Marseille, and Montpellier performed well, with positive growth in the second quarter. While Lyon, Toulouse, and Nantes still experienced negative price changes, their downward trend has slowed. However, overall price variations in these regions remained lower than usual for this time of year.




Interest Rate Stability and Future Implications: The European Central Bank’s decision to raise key interest rates for the seventh time in ten months may indicate a positive signal for developers. With the latest increase of 0.25%, the pace of rate hikes has slowed, raising questions about the future trajectory of interest rates. Despite this, interest rates in France are expected to continue rising until the end of 2023 due to the usury rate mechanism. This continuing rise could impact purchasing power across the country.

Declining Purchasing Power: The persistent rise in interest rates has led to a general decline in purchasing power across France since January 2022. Would-be buyers have seen a reduction in the average size of properties they can afford. Marseille has experienced the largest loss in purchasing power, with an average reduction of 16m². Paris and Lyon, on the other hand, have seen smaller losses of 5m² and 8m², respectively. If interest rates reach 4% by the end of 2023 and prices continue to rise, project developers may face even greater challenges, losing up to 3m² more by January 2024.

Conclusion: While May showed some signs of improvement in the housing market, the spring season in France fell short of expectations. Weaker price trends compared to previous years, combined with declining purchasing power, indicate ongoing challenges in the market. The effects of rising interest rates are expected to continue impacting buyers and project developers in the months to come. The housing market’s road to recovery may require sustained efforts and supportive policies to restore stability and confidence in the industry.

Contact Paris Property Group to learn more about buying or selling property in Paris.

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