After two years of brutal and dizzying decline, the real estate market finally seems to be stabilizing according to the Notaries of France

End of the fall

Currently, the annual volume of transactions carried out over the last twelve months is similar to that observed at the end of 2015 (approximately 790.000 transactions at the end of November-December 2015). The number of transactions should therefore begin to stabilise. The real estate market finally seems to have reached its low point after two years of sudden and dizzying decline. Prices in the landing phase, the drop in rates that continued in December with the announcement by the ECB Governing Council[2], combined with falling overall inflation in both the Eurozone and France, are restoring purchasing power to the French who had abandoned the market in an overly constrained environment. Signs of recovery could therefore seem to appear here and there, but for the moment it remains erratic and heterogeneous across the country. Transaction volumes have only just reached their stabilisation point and remain too low to trigger a virtuous dynamic. The recovery, if it occurs, will be in fits and starts.

While traditional parameters may suggest a new favorable environment, caution is advised. Measured optimism is called for in a context of geopolitical turbulence, tighter budgetary constraints, and political instability. According to the Banque de France, the decline in the average interest rate on new housing loans, the driving force of the real estate market, was still continuing in January, but the increase in the 10-year OAT could prevent further rate declines and at best allow them to remain stable. A sign of the prevailing fragility, French household confidence is deteriorating, with fears being numerous and growing. These fears, which are endemic, are not directly linked to the real estate market.

A drop in the prices of old housing is becoming less and less marked

In metropolitan France, prices of existing housing will fall for the fifth consecutive quarter by -3,9% in the 3rd quarter of 2024. Prices will fall at the same rate for apartments and houses. According to projections on pre-contracts, the annual decline in housing prices recorded in the 3rd quarter of 2024 in metropolitan France should gradually ease very significantly, from -2,1% over the year 2024 to -0,7% over one year at the end of February 2025. Prices of existing houses would fall more than those of existing apartments in 2024, with respectively -2,3% and -1,7% over one year. At the end of February 2025, prices would be almost stable on both markets.

In the provinces, over one year, prices of old housing will fall by 3,4% in the 3rd quarter of 2024. The drop in prices remains more marked for houses (-3,6% after 4,4% in the previous quarter) than for apartments (-3% after -3,8%). As for mainland France, the projections predict a gradual slowdown in the annual decline in the provinces, with -1,5% over the year 2024 (after -3,4% in the 3rd quarter of 2024) and -0,4% over one year at the end of February 2025.

In Île-de-France, over one year, the prices of old housing continue to fall sharply, but at a less sustained pace, reaching -5,3% in the 3rd quarter of 2024. They fall more for houses (-5,3% after -8%) than for apartments (-6,7% after -7,9%). Prices fall at a similar pace for houses (5,3% after 8%) and apartments (-5,2% after -6,6%). Apartment prices continue to fall sharply over one year in Paris and the inner suburbs (-5,5%), as well as in the outer suburbs (-4%). ​​In Paris, a price per m² of €9.420 is expected in February 2025. The annual price drop in the capital would be reduced to 1,4%, whereas it reached 7,7% a year earlier. At the same time, apartment prices are also expected to consolidate in Île-de-France (-1,4% in one year) with a decline of 2% in the Inner Suburbs and 0,5% in the Outer Suburbs in February 2025. Beyond the slightly more choppy and upward trends in recent months, house prices are expected to fall by 1,3% overall in Île-de-France from February 2024 to February 2025. They are expected to fall by 2,7% in the Inner Suburbs and remain almost stable in the Outer Suburbs (-0,6%).

The real estate crisis of recent months has affected the various players in the real estate sector, but also and above all the French in their ability to find housing. However, some economic signals seemed encouraging for 2025 to perceive a recovery. But the restart of the real estate market will be all the more significant as it will take place in a stabilized economic and political environment generating confidence. The announcement of measures for housing are as many promises that will have to be followed by actions, both to revive construction in decline, facilitate the implementation of the ZAN, and to meet the challenge of energy renovation of housing. Poorly orchestrated, the provisions making energy-intensive housing unavailable for rental and the measures restricting access to land, contribute to an accelerated reduction in the housing supply. The scarcity, programmed by the ZAN, of "artificializable" land, must be accompanied by energetic actions allowing the rapid redeployment of new constructions on old wastelands already artificialized or on land likely to be densified. This risk of deterioration of access to housing is all the more impactful, as it is inevitably correlated with the incompressible time of a resumption of construction activity (3 or even 4 years separate the first plan, from the housing delivered to its final beneficiary).

The new market - key figures[3]

In November 2024, housing permits decrease (-5,7% compared to October 2024) and stand at 26.900. The number of authorized housing units is 30% below its average level for the 12 months preceding the first lockdown, in data adjusted for seasonal variations and working days (CVS-CJO). From December 2023 to November 2024, 330.900 housing units were authorized for construction, i.e. 44.900 fewer than in the previous twelve months (-11,9%) and 28% fewer than in the 12 months preceding the health crisis (March 2019 to February 2020). In November 2024, 20.900 housing units would have been started, i.e. 300 more than in October 2024 (+0,6%). The number of housing units started in November 2024 would be 35% lower than its average for the 12 months preceding the health crisis. Over the last twelve months, 258.500 housing units would have been started, i.e. 49.900 fewer (-16,2%) than between December 2022 and November 2023, and 33% fewer than during the 12 months preceding the health crisis (March 2019 to February 2020).

[1] - Transaction volumes in France, all departments, excluding Mayotte

[2] - www.ecb.europa.eu - Monetary policy decisions of December 12, 2024

[3] - https://www.statistiques.developpement-durable.gouv.fr/

Credit - Results at the end of November 2024[1] - Banque de France data

The quasi-systematic recourse to non-revisable fixed real estate rates continues to secure French borrowers as well as the claims and pledges of national network banks.

Housing loans: a clear recovery trend

The CVS production of housing loans (excluding renegotiations) stood at €10,1 billion in November, still part of a recovery trend since the low of €6,9 billion in March 2024 (€9,7 billion in September and €10,4 billion in October). The decline in the average interest rate on new housing loans continued to 3,38% in November after 3,51% in October for operations excluding renegotiations, down 79 basis points compared to the peak of 4,17% in January 2024. The use of the flexibility margin with respect to the HCSF standard, at 15,4%, was still significantly below the overall envelope of 20% left to banks.

[1] - https://www.banque-france.fr/fr/statistiques/credit/credits-aux-particuliers-2024-11

The real estate market in overseas departments and regions

Sales volumes are decreasing at the same rate as at the national level

At the end of September 2024, approximately 9.100 transactions[1] of old housing were recorded over one year in the overseas departments and regions (DROM), or approximately 1% of sales made on the national territory (780.000 transactions[2]). The volume of sales decreased at the same rate in the DROM (-17% over one year) as on a national scale. This decline is equivalent both on the market for old apartments (-17%), which represents 47% of sales, and on that of old houses (-16%), which represents 53% of sales. It should be noted, however, that the share of sales of old houses is the lowest in Martinique (49% of sales) and the highest in Réunion and Guadeloupe (54% of sales). Nevertheless, the decline in volumes varies depending on the department: approximately -20% in Guadeloupe and Réunion, it is -12% in Martinique and stable in Guyana. The number of old apartments sold in Martinique and Réunion decreased at the same rate as the national level, but faster in Guadeloupe (-24%). Conversely, French Guiana stands out with an 18% increase in sales of old apartments. On the individual level, the sales volumes recorded in Guadeloupe and Réunion also followed the national trend, while they were more resistant in French Guiana (-12%) and even more so in Martinique (-6%).

Over the same period, Réunion and French Guiana recorded similar median price levels (€240.000 for old houses and around €2.600/m² for old apartments). Old housing in Guadeloupe is the most expensive, with a median price of €255.000 for houses and €3.230/m² for apartments. In terms of annual changes, prices of old houses fell in Guadeloupe (-6%) and Martinique (-11%), but remained stable in French Guiana and Réunion. Prices of old apartments increased by around 5% in Martinique and Réunion, and decreased moderately in Guadeloupe (-3%) and French Guiana (-1%).

Profiles of buyers and duration of ownership in the market for old housing in overseas departments and regions

Over one year to the end of September 2024, the buyers of old homes most represented in the DROMs are aged 30 to 39. However, the 40 to 49 age group is found in almost equal proportions in Guadeloupe and Martinique. In particular, buyers under 30 in the DROMs (8%) represent approximately half as many as in the national territory. However, it should be noted that Réunion and Guyana are among the youngest departments in France, with 34% and 60% of inhabitants under 24 respectively.

Furthermore, as in metropolitan France, the CSP of "Intermediate professions" is the most represented among buyers. Among the DROMs, Guadeloupe stands out with a share of "Artisans, traders and business leaders" buyers slightly higher than 11% (compared to 8% for all DROMs combined). Guyana has a lower share of "Retirees" buyers at 4% (compared to 11% for all DROMs combined).

Generally speaking, 47% of buyers in the DROM buy in their municipality of residence and 41% in another municipality in the department. However, Guadeloupe homes are less often purchased in the municipality of residence (35%). People from the Paris region represent 6% of buyers compared to 2% in Réunion and Guyana.

Finally, sellers of old Guadeloupean and Reunion Island homes keep their property longer (a little over 12 years) than those of Martinique and Guyanese homes (10 to 11 years).

[1] - Notarial real estate database

[2] - IGEDD and Insee according to DGFiP (MEDOC) and notarial real estate database

Illustrative image of the article via Depositphotos.com.