Halts in real estate, fears of a slump are growing

The old is slowing down, the new is collapsing: the slump awaits the real estate sector, hit by more difficult credit conditions.

"2022 marked, really, a great duality, with two semesters which are particularly pronounced": the first up sharply, the second down sharply, explained Elodie Frémont, president of the real estate statistics commission at the Notaries of Greater Paris.

Three major causes for this slowdown, she detailed: "the difficulty of housing loans, which are becoming more expensive and more complicated to obtain; a more tense general context, both economic and geopolitical; and perhaps to be a craze for the green house (...) which seems to be ending."

Since the spring 2020 confinement, the prices of old houses have been rising faster than those of apartments, driven by an increased desire for greenery and space.

If the price of houses continues to rise faster than that of apartments (5,8% against 3,5%), the rhythms tend to converge.

"Part of what is called the call of the green was also a call for lower prices," said Alain Tourdjman, director of economic studies at BPCE, to AFP.

Now that the price of houses has caught up with that of apartments, they become mechanically less attractive, he says.

Fears about energy consumption and tougher regulations for owners of thermal colanders have further penalized the housing market, as these are generally larger and more energy-consuming, points out Alain Tourdjman.

Real estate in the provinces, which was increasing faster than in Île-de-France, is also decelerating, even if it continues to outperform the Paris region (6% annual increase, against 1,4%).

Expensive credits

But the main cause of braking is the difficulty in borrowing.

The rapid rise in interest rates has increased the cost of credit. So well, the Notaries of Greater Paris have calculated, that a buyer who could buy a 100 square meter house in January 2022 can only acquire, with the same amount borrowed, 88 square meters a year later.

The usury rate, which prohibited banks from lending above a certain rate, for a time seized up the market, with buyers having to withdraw their offers for lack of access to credit.

But the easing of regulations decided at the end of January will not necessarily revive the market, believe several professionals.

“It is more the constraint of the economic environment and the decline in purchasing power which reduces the volumes of credit than the rate of wear”, estimates Loïc Cantin, president of the National Federation of Real Estate (Fnaim ).

Compared to inflation (5,2% in 2022), property prices are already falling, he points out.

And it's not going to stop there. “Yes, we are going to see further price deceleration in the coming months,” he says.

BPCE economists even estimate that prices in the old sector should decline by the end of the year, by 2 to 3%.

The broken new one

On the side of new real estate, the very bad figures accumulate. On Thursday, the housing division of the French Building Federation, which brings together developers, developers, house builders and renovators, alarmed by a "severe crisis" affecting the sector.

Construction of individual houses in housing estates fell by 22,2% in 2022, those in the diffuse sector (excluding housing estates) by 31%.

In question, points to the housing division, the rise in interest rates, but also the rise in construction costs, aggravated by the war in Ukraine, and the weakening of support mechanisms for buyers.