Europe 1 with AFP / Photo credit: RICCARDO MILANI / HANS LUCAS / HANS LUCAS VIA AFP 18:32 p.m., May 30, 2023

For the first time since 2015, prices fell in old real estate, confirming the crisis that seems to be taking hold in the sector. In a context of inflation, real estate is suffering from the rapid rise in interest rates, which heavily penalizes households that have to borrow to acquire a property.

"A real shock": the real estate crisis seems to be confirmed with a first decline since 2015 in prices in the old, a trend largely due to the difficulties of households to borrow and which is likely to continue. Compared to the fourth quarter of 2022, prices fell by 0.2%, according to the Notaires-INSEE index, which is a reference, published on Tuesday. Over one year, prices increased by 2.7%, a very clear deceleration compared to the end of 2022 (4.6%).

"The real estate market seems to have entered a new era, with interest rates increasingly strong," said at a press conference the president of the statistical commission of the Notaries of Greater Paris, Elodie Frémont. "It is therefore a real shock that is suffered in this quarter," says Frémont, noting a drop in transactions over 12 months, from 1.12 million at the end of 2022 to 1.07 million in the first quarter of 2023. A figure that nevertheless remains above the historical average. The notaries' index, based on sales definitively concluded, reflects market trends a few weeks late, but it is the most comprehensive indicator.

"There is a need for housing"

"This is the first reversal of the trend, which is a strong marker of the impact of the reduction in the borrowing capacity of all French households in the face of the acquisition of a property," responded to AFP Loïc Cantin, president of the National Federation of Real Estate (Fnaim). In a context of inflation, real estate is suffering from the rapid rise in interest rates, which heavily penalizes households that have to borrow to acquire a property.


READ ALSO - EXCLUDED EUROPE 1 - Real estate: prices down, interest rates up... Is this the right time to buy?

"The first-time buyer, he is there, there is a need for housing, but he must now make a choice": pay more or make sacrifices on the surface, detailed Me Frémont. Not to mention those who are refused a loan, always numerous according to notaries. "The structural lack of housing, and low credit rates, this is why prices have been multiplied by 2.5 in 20 years, and there, we feel that it is the end of this phase," commented Corinne Jolly, president of Particulier à Particulier. A lack that is not likely to be absorbed, new construction being broken, with a drop in the first quarter of bookings with developers (-41% over one year) and building permits (-11.5%).

In the Paris region, prices are now in the red over one year (-0.6%). The decline in Paris is accentuated (-2%), except in the most expensive arrondissements (Paris Centre, VIe, VIIe), where real estate continues to climb, probably driven by luxury goods and foreign buyers. The Notaires du Grand Paris forecast that the annual decline in prices should increase in the second quarter, approaching, for the Ile-de-France, 5% for apartments and 3% for houses. Across the France, houses continue to grow faster than apartments (+3.1% versus +2.2%), as has been the case since 2020, but the gap is closing rapidly compared to previous quarters.

The share of thermal sieve tripled between 2021 and 2022

Moreover, in the first quarter of 2023 alone, the trend has reversed: the price of houses fell more than that of apartments (-0.3% against -0.1%). "People realize that the house was not for them," says Corinne Jolly. "They are moving a little away from the postcard image that there was at the end of confinement." Environmental regulations, which will gradually prohibit the rental of thermal strainers, are beginning to have effects on sales, note notaries.

In Ile-de-France, the share of housing classified G (the worst label) in transactions tripled between 2021 and 2022 for apartments (2.7 to 7.9%) and doubled for houses (3.6 to 8.5%), according to data from notaries. In the coming months, "there could be a two-speed market," imagines Corinne Jolly, "with an influx of offers of thermal strainers because of sellers who do not know what to do with them".