Property prices in France are falling: the reasons
Experts have analyzed the current global market dynamics and made their forecasts for a number of European countries. According to the document, real estate in France may go down in price, the fall is projected at 5-10%.
It should be noted that the local real estate market has long been characterized by active development, but in 2022, the situation has changed. The French economy, like other countries in the world, was experiencing a rise in inflation, which resulted in a decrease in purchasing power of the population. The situation was exacerbated by an increase in interest rates, which resulted in a number of potential buyers of real estate refusing the idea of a mortgage.
According to a number of brokerage firms, house prices in France will fall by the end of 2023. Contributing to this dynamic is an increase in interest rates. For example, at the beginning of 2022, the rate for a mortgage loan was 1%, and in the first quarter of 2023, it was 2.5%. Experts also suggest that the figure will continue to rise, not ruling out an increase to 3.5% during 2023. The reason for the increase in the cost of credit was the policy of the European Union to curb the record growth of inflation. The authorities have several times increased the key rate.
Thus, for most consumers, the opportunity to acquire real estate through the execution of the loan has become extremely expensive. According to surveys, if at the end of 2021, the French considered a loan of 223 896 euros, in December 2022, the figure was 194 020 euros.
Another factor in the decline in purchasing power is the dynamics in the real estate market, which has been observed in France in recent years. Housing prices have skyrocketed, booming in 2020 and 2021. According to Meilleurtaux, in 2019 in Angers, to buy a house of 94 square meters you had to take out a 20-year loan for 200 thousand euros. Now for such money, you can buy a property of 52 square meters. In Toulon, the difference in the area of housing for the designated amount decreased by 24 sq.m since 2019, and in Reims and Nice – by 21 and 16 sq.m, respectively. This average has decreased by 13 sq.m over the year in major French cities, and by 20 sq.m over four years.
All these factors have a negative impact on the dynamics in the sector. Experts note the decline in real estate transactions. For example, during the summer months of last year alone, the number of sales fell by more than 4% compared to 2021. In 2022, home sales showed a drop of 8.2%. As for apartments, here the slowdown was at the level of 0.2%.