The real estate market in France today

High prices despite a difficult context

First of all, real estate prices remain high. Sellers continue to post prices that do not reflect the reality of a struggling market. Although owners are more open to negotiation today than six months or a year ago, they maintain high expectations, reluctant to significantly lower their prices. This situation naturally slows down transactions.

Financing difficulties for buyers

At the same time, there are fewer and fewer buyers. The main reason is the difficulty in obtaining financing. Although the situation has improved slightly over the last two or three months, until recently, obtaining a bank loan was almost mission impossible. This uncertainty over financing capacities continues to weigh heavily on the volume of transactions.

Two distinct markets

It is appropriate to distinguish two segments of the current real estate market:

• The premium market: This concerns exceptional properties intended for foreign or very wealthy customers. This segment is doing relatively well, with stable demand for prestige properties.
• The classic market: For normal customers with goods worth around 500.000 euros. This market is much more complicated. There are significantly fewer transactions there, and although prices have not fallen drastically, they are stagnating at still high levels.

Why isn't now the time to buy?

Several signals indicate that this is not the right time to buy real estate in France.

• Tax Increases: In 2023, we saw a dramatic increase in property taxes, a trend that is expected to continue this year. Property taxes have sometimes almost doubled, strongly impacting the profitability of real estate investments. Additionally, homeowners renting through Airbnb or owning second homes are also seeing their taxes increase.
• Cost of preserving assets: The costs associated with preserving real estate are increasing. With the new Energy Performance Diagnosis (EPD) requirements, a lot of work will be necessary to be able to rent properties, thus increasing expenses for owners.
• Return on investments: Unlike in the 2000s, the return on real estate investments is much less attractive today. In the 1970s, buying real estate was not attractive due to high returns on bank investments. Today, the situation is similar, with an insufficiently remunerated risk premium.

A strategic expectation

Faced with these observations, it seems wiser to wait for a price correction before considering a real estate purchase. Current signals show an unfavorable trend, and it is essential that the risk premium is adequately remunerated before committing to a purchase. In summary, patience and caution are required for those who wish to invest in real estate in France today.

Tribune by Roy Masliah, Founder of decla.fr (LinkedIn).