After almost two years of decline, will the real estate market finally recover?

expectation

We have to go back to December 2015 to find transaction volumes at this level. At the current rate of decline, the transaction volume could fall below 750.000 at the end of summer. The start of the September school year will be pivotal for real estate market activity, given the more favorable elements that were beginning to emerge at the dawn of this summer.

The real estate market finally seemed to be approaching its landing point after almost two years of decline. While a fragile recovery was simmering, the ECB had also chosen in June to lower its key rates after having maintained them at the same level for nine months, due to inflation which was slowing and whose prospects were clearly improved.^[1]. This choice then offered a breath of fresh air and more encouraging prospects to the real estate market. There is no doubt that the recovery in demand will require a prolonged reduction in rates, but the pace of this should be more cautious on the part of the European institution between now and the end of the year. This hope, born from the loosening of monetary policy which resurfaced positively on loans to individuals, could be called into question by the political uncertainty born from the recent dissolution of the National Assembly. In fact, the real estate market was marked by a halt in the easing of credit conditions, causing a wait-and-see attitude. However, it seems certain that the French are willing to return to the real estate market as soon as rates allow it and despite current expectations. Their appetite for the stone refuge cannot be denied; the slight improvement in spring noted by notaries throughout the country demonstrates that the real estate market is sensitive to both economic and political stability, a guarantee of confidence.

Price declines expected to begin to ease

In mainland France, the prices of old housing fell for the 3rd consecutive quarter over a year by 5,2% in the 1st quarter of 2024. Prices fell by 5,5% for apartments and by 4,9% for houses. This drop should ease in the coming months to stand at -4,8% year-on-year at the end of August 2024. While the drop in prices was greater for apartments than for houses in the 1st quarter of 2024, it would be now equivalent on both markets.

In the provinces, projections predict, as for mainland France, a slowing of the decline at the end of August 2024. It would still be a little more marked on the market for old houses (-4,7% over one year) than on that of old apartments (-3,7% over one year).

In Île-de-France, over one year, prices of old housing continue to fall more sharply in the 1st quarter of 2024 (-8,1%). In Paris, this drop is 7,9% over one year with a price per m² of €9.490. However, according to projections made from preliminary contracts at the end of August 2024, the price per m² of Parisian apartments would change little in the coming months: from €9.440 in April (-7,8% over one year) to €9.450. € in August (-6,8% over one year). Elsewhere, and particularly in the Greater Crown, prices are also expected to change little or increase slightly over 3 months to the end of August.

The real estate crisis of recent months has affected the various real estate players, but also and especially the French in their ability to find housing. Governments have struggled to establish a renewed housing policy even though the real estate sector as a whole is an engine of growth and a priority for the French. The next government will be able to find in housing policy resources to reassure the French around a theme that concerns them all. Let us therefore hope that it benefits from an ambitious and clear policy in order to face future challenges such as climate change. As such, notaries, in a report produced by the real estate law section of the Institute of Legal Studies of the Higher Council of Notaries, identified possibilities for improving standards to address the major challenge of climate transition in housing^[2]. The notary proposes 10 solutions with a view to improving the legislative, regulatory and financial systems put in place to promote the energy transition and make it more efficient. These legal, technical and financial solutions are proposed to simplify and accelerate the necessary transformation of the French real estate stock, in a manner acceptable to society. Notaries also emphasize the need for simplicity and readability, given the impressive accumulation of standards over the past ten years.

The new home market - the key figures^[3]

In May 2024, housing authorizations decrease and stand at 27.500 (-3% compared to April 2024). The number of authorized housing units is 29% below its average level for the twelve months preceding the first confinement, in data adjusted for seasonal variations and working days (CVS-CJO). From June 2023 to May 2024, 353.800 housing units were authorized for construction, or 15% less than in the previous twelve months. In May 2024, 26.500 housing units would have been started, i.e. 14,2% more than in April 2024. Over the last twelve months, 280.100 housing units would have been started, i.e. 21,5% less than between June 2022 and May 2023.

[1] ECB Economic Bulletin No. 4/2024

[2] www.csn.notaires.fr/fr/actualites/le-csn-presente-son-nouveau-rapport-logement-et-transition-climatique

[3] www.statistics.developpement-durable.gouv.fr

Illustrative image of the article via Depositphotos.com.