The French real estate market is experiencing a slowdown, and the situation is not expected to improve in 2024. This is attributed to a challenging economic period marked by inflation, resulting in a decline in the purchasing power of the French population. Additionally, the rise in bank interest rates is making access to credit more difficult. As a consequence, property sales have been decreasing towards the end of 2023, and this trend is likely to persist, as highlighted by various studies.
Decrease in Sales and Prices
The Notaires de France report a decline in the number of property sales in 2023. While 1.13 million sales were recorded between September 2021 and September 2022, only 928,000 were reported in the same period the following year. The real estate barometer FNAIM-Clameur for December 2023 notes a significant decrease, stating, “The decrease in the number of transactions has accelerated since 2023, reaching 908,000 sales in France (-20% year-on-year) over the 12 months ending October 2023.”
Simultaneously, there is a drop in prices towards the end of the year, marking the first decrease since 2015. The Notaires de France observe a nationwide decrease, particularly pronounced in the Île-de-France region. The price index for existing apartments in metropolitan France decreases by 2% annually, and for existing houses, it drops by 1.6%. In Île-de-France, the index drops by 5.3% for apartments and 5.4% for houses. This downward trend is expected to continue into 2024.
Stagnant Buying Intentions
Despite expectations that mortgage rates will stabilize after recent highs, the FNAIM-Clameur real estate barometer predicts a rate around 4.3% in the first quarter of 2024. However, industry stakeholders are not optimistic about a market recovery in the coming year. According to the study “Les Français et l’immobilier” conducted by OpinionWay for Laforêt, buying intentions for the next year remain stagnant compared to those for 2023.
Economic conditions have led nearly one in four French individuals to cancel or postpone their real estate projects, with access to credit being a significant obstacle. For those under 35, 39% had to delay or cancel their plans, while only 12% of those over 50 faced similar challenges, according to the OpinionWay survey.
Mortgage finance as a key driver
REALITES, a prominent player in the French real estate sector, provides insights into the trends and developments for the upcoming year. Mortgage finance, a key driver of the real estate market, is currently being granted cautiously. The rise in interest rates and stricter lending conditions are limiting access to mortgage credit. With inflation’s return, banks have increased rates beyond 4% for 20- or 25-year mortgages, and this upward trend may continue in 2024 due to the European Central Bank’s need to control inflation and support the euro.
Despite these challenges, demand remains resilient, with buyers seeking properties with appealing outdoor spaces, influenced by the memories of pandemic-related lockdowns. REALITES addresses this demand by focusing on the outdoor features of its residences.
In 2023, prices began to decline, and this trend is expected to intensify in 2024, reaching a 4% average decrease. The decline is more pronounced in metropolitan areas, such as Paris, Bordeaux, and Lyon. The average time to sell a property has increased to 85 days, with Paris experiencing an increase from 59 days in 2022 to 80 days in 2023. The delay is even more significant in regions like Auvergne-Rhône-Alpes and Occitanie, reaching 100 days.
While sellers are delaying their plans, limiting the decline in prices, the overall market imbalance is expected to persist in 2024. The tightening of financing conditions over the past two years has significantly impacted real estate transactions, with a 20% decrease in 2023, reaching the lowest level in seven years.
Key Points for the Evolution of Real Estate in 2024:
– Mortgage rates expected to stabilize between 4% and 5%.
– Personal contribution requirement likely to remain around 10% to 20%.
– Anticipated 10% to 20% decrease in transaction volume.
– Expected 4% average decline in property prices.
– Extended selling periods ranging from 80 to 100 days by region.
– Demand for apartments with outdoor spaces near employment centers.
The new realities of the French real estate market in 2024 present challenges, but they also open doors to strategic opportunities. Navigating these changes requires a nuanced approach, emphasizing renovation, energy efficiency, and adaptability to market shifts. As the landscape evolves, stakeholders in the real estate sector will need to stay agile and informed to make the most of the emerging trends and capitalize on the potential for growth and innovation in the market.
