The real estate fever has subsided in France

The 32% price increase between the end of 2015 and mid-2022 fizzled out. The benchmark index published Thursday marks for the first time a decline of -1,8% over one year in the 3rd quarter, a traditionally prosperous period of the year, after increases of +0,5% in the second quarter and 2,7% to the first.

All geographic sectors and market segments are affected, houses (-1,6%) and apartments (-2%).

The drop is particularly strong in Île-de-France (-5,3%), where apartment prices are decreasing in both the inner suburbs (-6%) and the larger ones (-4%). But it is above all the volume of transactions which is falling (-34% over one year).

In Paris, the average price per square meter fell for the first time since 2019 below 10.000 euros, to 9.920 euros at the end of November, a decline which is expected to continue, declared Elodie Frémont, president of the statistical commission of Notaries of Greater Paris.

The prices of Parisian apartments per square meter range from 7.540 euros (-9,2% over one year) in La Chapelle (18th arrondissement), the cheapest district, to 19.150 euros (+3,5%) in the Champs Elysées (8th), where prices are driven by foreign investment.

The downward trend is similar in the provinces, where prices are also falling for the first time in eight years. This is particularly true for houses (-1% in the third quarter after +1,3% in the second).

Only apartment prices are doing well (+0,5%) except in Lyon (-7,3%).

The overall number of transactions, an indicator of market activity and which had reached an absolute record in 2021, continues to decline rapidly.

For the whole of France excluding Mayotte, it fell below the one million mark, to 928.000 in the 3rd quarter, compared to 1 million at the end of June.

Frozen market

In new construction, the trend continues to decline. The number of building permits issued continued to fall in October (-26,2% over one year), with 375.100 housing units authorized for construction, according to provisional figures published Thursday by the Ministry of Ecological Transition.

Since a record level reached in August 2022, due to regulatory deadlines, the number of permits issued each month has stabilized at a low level, inexorably reducing the annual total.

The estimated number of construction sites started, which traditionally follows that of permits by a few months, is also eroding significantly (-17,8%), with 305.400 construction starts over 12 months.

The drop in authorizations concerns all types of housing, notably pure individual (-31,8%), but also grouped individual including subdivisions (-25,4%), collective (-25,2%) and senior and student residences (-16%).

New real estate is experiencing both a sharp drop in buyers' purchasing power and an increase in construction costs.

The rapid rise in interest rates has excluded many buyers from the market, particularly first-time home buyers, whose income is also being eroded by inflation.

“It is to be feared that we have settled into a long crisis after historic peaks at the end of the pandemic”, commented Elodie Frémont, recalling that the inflation rate of 4% in October is “very impactful for the household purchasing power.

“We are recording the sharpest deceleration in sales of old housing since the post-war period,” Loïc Cantin, president of the National Real Estate Federation (Fnaim), told AFP, for whom the year 2024 must be that of "the readjustment of market prices, if interest rates maintain the announced stability".

“This drop in prices will accelerate in the coming months. For the moment they are not falling enough to restart the machine,” warns Thomas Lefebvre, scientific director of Meilleurs Agents.