2025 review and 2026 outlook: the French and the private rental market

What impact do crises have on the real estate projects of the French?

Their choice has primarily focused on the existing property market, where supply is slowly recovering. The increasing predominance of transaction volumes in the provinces rather than in the Île-de-France region has been further confirmed since the beginning of the year, resulting in similar price trends. Nevertheless, contrasting dynamics remain, with some markets experiencing weaker recoveries, others showing signs of improvement, and still others facing persistent difficulties.

The existing home market has shown some signs of recovery since its low point in the fall of 2024. However, transactions slowed slightly starting in May, likely due to an uncertain political and budgetary environment and the increase in transfer taxes. Despite this renewed activity, price trends over the last six months suggest a market where supply and demand are only moderately tight. While the correction is clearly behind us in the long term, the year-on-year recovery has been more measured, stronger in the provinces and for apartments than in the Île-de-France region or for houses. Nevertheless, the situation is improving, with prices rising in nearly two-thirds of the market, compared to half of them six months ago.

The new-build market has rebounded in recent months. The recovery in housing permits is quite strong (+28% year-on-year from April to September), and construction starts are following suit, albeit at a more moderate pace (+9%). However, volumes remain at very low levels. By type of housing, owner-occupied and intermediate rental properties are driving this recovery (+13% and +9% respectively). Two distinct situations exist within each sub-market:

• Property development could reach a historic low for the third consecutive year, at a level still nearly 30% lower than that prevailing over the 2018-2022 period. Demand from individuals is declining for the fourth year in a row. At the regional level, the opposing dynamics of transactions and prices indicate a disconnect between supply and demand;
• The production of purely individual housing has seen a clear recovery over the last 6 months (+20% compared to the previous six months), benefiting from the expansion of the zero-interest loan since April 1, 2025.

Are real estate markets heading towards a greater decoupling between new and old properties by 2026?

The current stability of interest rates could give way to a slight increase in 2026. Aware of the deteriorating economic and financial environment, a growing number of French consumers now consider an interest rate above 3% acceptable. Furthermore, with the stabilization of key interest rates and the completion of the balance sheet adjustment, the ECB's monetary policy will no longer exert downward pressure on financing costs by that time. In this context, the rise in the 10-year French government bond (OAT) will partially impact mortgage rates, due to the lending structure being more favorable to first-time buyers. This atypical situation is expected to continue next year, bringing the average interest rate on new mortgages to 3,35%.

Housing sales are expected to follow varied trajectories. Since the beginning of 2024, buyers have perceived the current timing as slightly less unfavorable than sellers' perception of it as less unfavorable. Simultaneously, the recovery in transactions, particularly in the existing housing market, is driven by a slightly increased reliance on credit. For 2026, the deteriorating budgetary and financial environment (rising interest rates coupled with rising unemployment) is expected to weigh on real estate activity, especially in the existing housing market. The recovery in new home sales is projected to be limited to the single-family home segment and will remain modest compared to pre-2023 sales volumes. Without support measures for rental investment, sales from new developments are expected to remain at their current low levels.

In this context of a slight decline in transactions and strong uncertainties that are undermining the confidence of the French, the price dynamics in the existing housing market would be compressed: +0,7% in 2026 after +1,0% in 2025. Moreover, the prospects for price increases remain limited in the opinion of both buyers and sellers.

Regarding the use of mortgage loans, new lending has stabilized in recent months. First-time buyers represent the largest and most dynamic segment. Thus, in 2025, the mortgage market rebounded more strongly than real estate variables (prices and transactions): +29%. In 2026, the less favorable budgetary and financial climate is expected to negatively impact household purchasing decisions and, consequently, a slight decline in mortgage lending.

Private landlords: what are the differences over the last three years?

While the investor profile has changed little since 2022, the regulatory, budgetary, and financial environment for rental property investment has deteriorated significantly. This demographic represents 11% of French people aged 18 and over. They are more urban, more affluent, more often live as couples, and own their homes outright (53% vs. 35% of the French population).

What about the French who are not currently private landlords but are interested in becoming so? They represent 23% of the French population in 2025 (down 1 point compared to 2022). The proportion of 30-49 year olds has increased significantly within this group, rising from 39% in 2022 to 45% in 2025. While they are most often managers or tradespeople (41%), the proportion of blue-collar/white-collar workers wishing to invest in rental property has increased (38% vs. 33% in 2022).

Interviewed three years apart, four key points stand out:

Fact #1: The nature and strategy of investment are evolving. More private landlords than in 2022 own multiple properties (41% vs. 38%). They report owning more apartments than in 2022 (70% vs. 64%) and have generally been renting for longer periods (32% report renting their property for more than 10 years vs. 24% in 2022). Unfurnished rentals (56%) remain the primary rental method (-3 points vs. 2022), while furnished rentals (30%) and seasonal rentals (14%, +2 points vs. 2022) are gaining ground.

Fact #2: Private landlords are now more likely to want to divest than to invest (25% versus 23% respectively), primarily due to the heavy tax burden. In 2022, 30% wanted to continue investing, while 18% were considering divestment. Certain profiles of private landlords stand out, particularly according to their 5-year strategy:

• Those aged 65 and over express a stronger propensity to want to maintain their rental investment as is (56% vs 40% of all private landlords);
• Those aged 75 and over are more likely to withdraw (36% vs 25% of all private landlords).

Besides the heavy tax burden on rents (32%), other reasons for disengagement are put forward by landlords, such as the burden of property management (25%) and the need to carry out work due to the energy class (20%).

Fact #3: For 45% of private landlords, rental profitability is the decisive factor, far ahead of other criteria, even though it has slightly declined in the hierarchy of motivations over the past three years (-5 points). At the same time, the desire to build up supplemental retirement income is increasing (+5 points), as is the possibility of having a property to pass on to a child or relative (+7 points). Among the obstacles to undertaking a rental property investment, the most common concerns are the difficulties a landlord might face with a tenant (52%), followed by increased taxes (41%) and financing renovations (33%). Over the past three years, more landlords have reported concerns about renting due to Energy Performance Certificate (EPC) standards (+4 points to 21%).

Fact #4: The expression of some of these concerns could explain the increase in professional management by one in two landlords in 2025 (+9 points compared to 2022). Furthermore, landlords report a decrease in difficulties finding tenants during this period, as well as a reduction in significant damage to rental properties (-4 to -5 points since 2022).

Illustrative image of the article via Depositphotos.com.