2023-12-22-莱坊-The_residential_property_market_November_2023_12页_1mb

Summary of the French Residential Property Market (November 2023)

Core Content

The French residential property market has experienced a significant slowdown in 2022 and 2023, marked by declining sales and investment volumes, and a correction in existing property prices. The market faces challenges due to tightened financial conditions, reduced household purchasing power, and a worsening economic climate. The new-build market has seen a stabilisation in prices, while the existing property market continues to face downward pressure.

Main Points

Market Slowdown

• Sales Decline:
  • Existing home sales in the Paris Region fell by 30% in the first eight months of 2023.
  • New home sales dropped by 28% year-on-year by the end of August 2023.
• Investment Volume:
  • Total investment in the residential market in the first nine months of 2023 was €1.9 billion, a 59% decline compared to the previous year.
  • Managed residential investment fell by 25%, while the coliving sector saw a tripling of investment volumes.

Price Trends

• Existing Properties:
  • Prices in the Paris Region fell by 4.5% year-on-year to €6,540/sqm by the end of August 2023.
  • A 6% fall is expected for the entire existing property market in 2023.
• New-Build Properties:
  • Prices increased by 1.3% to €5,460/sqm in the Paris Region by the end of September 2023.
  • Prices in the central zone (Paris and inner suburbs) rose to €6,020/sqm, up 1.3% from Q3 2022.

Economic Context

• GDP Growth:
  • France's GDP growth is expected to be between 0.9% and 1% in 2023, down from 2.5% in 2022.
  • The eurozone's GDP growth is projected to be +0.6% in 2023 and +1.2% in 2024.
• Inflation:
  • Inflation in France reached 5.8% in October 2023, down from 10.6% a year earlier.
  • It is expected to moderate to 2.6% in 2024 and 1.8% in 2025.
• Purchasing Power:
  • Household purchasing power is expected to increase by 0.6% in 2023 and 5.0% for average wages.
  • This should support household consumption, which is forecasted to rise by 1.8% in 2024 and remain solid in 2025.

Interest Rates

• Rising Rates:
  • The average borrowing rate in France reached 4.12% in October 2023, up 203 basis points from October 2022.
  • This has reduced household borrowing capacity and increased the proportion of households switching to rented properties.
• Impact on Loans:
  • Home loan production has continued to decline, with a 43.5% drop year-on-year by the end of October 2023.
  • Loan durations remain high at 253 months (c.21 years).

Housing Policy Developments

• New Measures:
  • Zero-rate loans will be extended until 2027, but only for specific types of housing.
  • The "Housing First" plan and the development of the Real Solidarity Lease (BRS) are key initiatives to support affordable housing.
  • The BRS allows households to buy a home at a lower price and lease the land from a not-for-profit organisation (OFS), offering 20–40% savings compared to conventional purchases.
• Policy Challenges:
  • The government faces budget constraints and has to balance housing initiatives with other priorities.
  • The BRS scheme remains marginal, with 149 OFS approvals issued between 2017 and April 2023.
  • The scheme is expected to expand, particularly in regions like Île-de-France.

Existing Property Market

• Continued Decline:
  • Sales of existing homes in the Paris Region dropped by 25% in Q2 2023 compared to the same period in 2022.
  • The decline was more pronounced for houses than flats.
  • By the end of August 2023, the average price of flats in the Paris Region fell by 4.5% to €6,540/sqm.
• Price Correction:
  • A 3% price correction is expected by the end of November 2023, with the most significant drop in the inner suburbs (6.4%) and Paris (6.1%).

New-Build Market

• Sales Decline:
  • New home sales in the Paris Region dropped by 47% in the first nine months of 2023 to 10,000 lots.
  • Conventional multi-family home sales fell by 4,200 lots year-on-year.
• Supply and Demand:
  • The supply of new housing in the Paris Region was 24,400 lots at the end of September 2023, a 4% drop year-on-year.
  • Prices remain high due to low supply and strong demand, particularly in Hauts-de-Seine and Seine-Saint-Denis.

Key Figures

• Sales of Existing Homes: 108,000 in the Paris Region (down 30% year-on-year).
• Sales of New Homes: 11,700 in the Paris Region (down 28% year-on-year).
• New-Build Production: Fell by 32% in the Paris Region over the past 12 months.
• Average Interest Rate: Rose to 4.12% in October 2023, up from 2.09% in October 2022.
• Outstanding Loans: Reached €1,293 billion in August 2023, up 2.4% year-on-year.
• Credit Duration: Stood at 253 months (c.21 years) in October 2023, up 8 months year-on-year.
• BRS Homes Delivered in 2022: 338 units.
• BRS Homes Planned for 2025: 13% of reserved sites are dedicated to BRS.

Investment Market

• Investment Volumes: Fell by 59% in the first nine months of 2023 to €1.9 billion.
• Managed Residential Investment: Fell by 25%.
• Coliving Investment: Increased by over three times year-on-year by the end of the third quarter of 2023.

Economic and Employment Indicators

• Net Job Creation:
  • 319,000 jobs in 2023, down from 775,000 in 2022.
  • A negative balance of -60,000 jobs is expected in 2024, leading to a rise in the unemployment rate to 8% by 2025.
• Unemployment Rate:
  • 7.4% in Q3 2023, up from 7.2% in Q2 2023.
  • Expected to reach 7.8% by 2025.

Conclusion

The French residential property market is in a phase of readjustment, with a marked slowdown in both existing and new home sales. Prices for existing properties have corrected, while new-build prices remain stable. The market is being affected by high interest rates, reduced purchasing power, and a restrictive financial environment. Housing policy measures, such as the extension of zero-rate loans and the development of the BRS, aim to support the market and promote affordable housing. The new-build market continues to face supply constraints and high prices, with a potential stabilisation or decline in 2024.