Residential real estate in France: the three mid-year trends that are shaping the future of the sector

The French real estate market is going through a period of transition, marked by significant developments that influence real estate prices and sales. According to the Chamber of Notaries, the price of housing in the Paris region fell by 7,4% between May 2023 and May 2024. At the same time, the decline in activity continues with fewer than 25.000 old homes in the Paris region from February to April 2024, a decline of 23% compared to the same period in 2023.

#1- The impact of borrowing rates and political uncertainties

Fluctuations in borrowing rates and uncertainty related to the recent elections have created a wait-and-see period in the market. High rates have slowed price increases, but the prospect of a gradual rate cut from an average of 4,05% for a 25-year loan in January 2024 to 3,85% at the end of June could stabilise prices in the short term. However, political uncertainty continues to influence household confidence, limiting their propensity to invest in real estate.

#2 - The dynamics of the entry-level market

The first-time buyer segment remains dynamic, supported by attractive tax measures such as the VAT reduced to 5,5% and zero-interest loans. The programs in Vente en l'État Futur d'Achèvement (VEFA) benefit particularly from these incentives, facilitating access to property for households with modest incomes. For example, on a program currently marketed by Catella Residential in Blanc Mesnil, the sales rate is 9,3 sales/month. This segment remains a driving force for the market, despite the current economic challenges.

#3 - The rise of sustainable construction practices

Increased awareness of the environmental impact of real estate construction has led to a global reflection by developers allowing:

• The wider adoption of ecological standards. Thus, some developers are keen to go beyond the criteria set by the RE 2020 standard, and are more inclined to reach the 2025 or even 2028 thresholds.
• Sourcing and using sustainable materials such as wood. An example is REI Habitat, which, since the company was founded in 2009, has made a commitment to ecological construction through the real estate development of wooden-framed housing to limit CO2 emissions (1m3 of concrete = 1m3 of CO2) and to favour the wood industry in France, with the aim of maintaining and creating jobs in the country.
• Energy optimization of buildings from their design stage, for example through their exposure to benefit from the light and heat of the sun, offering maximum reduction in energy consumption.
• The development of innovative construction methods, such as off-site construction. The developer GA, a pioneer in the sector, has since the 1970s developed its industrial approach around this innovative process which consists of modeling the elements of a building in BIM before manufacturing them in factories and transporting them to the construction site to assemble them. The advantages are numerous: reduction of lead times (by 20 to 30% on average), energy consumption (up to 50%), CO2 emissions (-20%) but also better recovery of waste in factories and on construction sites and improvement of working and safety conditions.

For Paul Cayla, President of Catella Residential: “Despite current challenges related to borrowing rates and political uncertainty, we are seeing resilience in the entry-level market and a significant shift towards more sustainable building practices. These trends reflect the real estate sector’s adaptation to new economic and environmental realities, paving the way for a more accessible and responsible market.”

Illustrative image of the article via Depositphotos.com.