Market Update: Will the market upturn continue for real estate in France for 2016?

“To recover or not to recover, that is the question.” The latest report from Meilleurs Agents celebrates the French real estate market’s high performance in 2015 and explores whether this trend will continue through 2016. The Paris notaires hailed 2015 as a very positive year for the real estate market in Paris and Île-de-France. Sales volumes were up by more than 15% over the previous year, and activity levels are now close to the boom years a decade ago. Will this trend continue through 2016 and beyond?

A number of market trends of the last months are noteworthy. From the selling side, properties came to market at decidedly reasonable prices in the last quarter of 2015, which fueled the high volume of transactions on the market. “Irrational exhuberance and overpriced real estate over the last years meant that even very desirable listings languished on the market for months or more” says Kathryn Brown of Paris Property Group. “Properties priced at or near their true market value is a welcome change.”

From the buyer’s side, the terrorist attacks that struck Paris in November 2015 have thankfully not left a lasting mark on international and local interest in Paris real estate. In its monthly barometer of prices for residential property in Paris and Île-de-France, Meilleurs Agents surveyed preliminary sales agreements (compromis or promesses de vente) signed between the 1^st and 31^st of January 2016 as an indicator of the trend in property prices for the spring selling season.

Paris property prices increased by 0.4% over the first month of the year, bringing the Paris price per square meter average to €8,040, according to the Paris notaires association. The price average is €4,270/m2 in Paris’ inner suburbs and €2,930/m2 in the outer suburbs, bringing the average region-wide to 5,310 euros per square meter. The Paris notaires expect prices to remain stable in coming months. Particularly notable is a 15% growth in sales volumes over one year, with 792,000 sales realized between November 2014 and November 2015.

The data points to both positive and negative signs for the market’s evolution in the coming months. Sales volumes continue to increase and interest rates remain at historically low levels, even declining from 2.5% to 2.4% in January. “The best bank customers are able to negotiate loans at rates lower than 2% — and everything indicates that rates should remain low in coming months,” says Sébastien de Lafond, CEO of MeilleursAgents. He also points out some less encouraging factors – for example, that the French unemployment rate continues to rise and shows no sign of improving. “There cannot be any significant improvements in the housing market if employment does not recover.”

Important too, is the level of business confidence in France as a whole and in the real estate market in particular. Continued uncertainty in Paris with respect to usage restrictions, rent caps and the city’s treatment of short term rental activity, do not help buyer or seller confidence in the market. That said, the increased market activity this past January is likely to continue for at least a few months. Ms. Brown sees a positive outlook for Paris in particular. “A significant increase in the number of sales at or close to full asking price mean a market that is better priced at the onset, and strong, confident interest in buying Paris real estate. There are more buyers for properties than there are properties for sale, and apartments are often selling within days of their public listing.  The opportunity presented by low interest rates, favorable currency exchange rates and prices at a three-year low might start to move prices up again this spring.” Brown points out that the Paris real estate market survived the downturn in recent years with far more resilience than the rest of France, in part due to consistently high international investment in the capital.

Photo credit: Flickr / TaxRebate.org.uk