2023-11-11 08:10:58
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Following a period of sharp price increases following the confinement linked to the Covid-19 pandemic, the French real estate market is facing a new reality: a lasting drop in prices. This development raises questions among owners, potential buyers and investors. Why does this downward trend persist? Should you put your property up for sale before prices drop further? Is now the ideal time to consider a new real estate purchase?
Why are prices continuing to fall in France?
One of the main causes of the decrease in prices on the French real estate market lies in the complexity and difficulty of obtaining a loan to finance your real estate project, which tends to reduce demand.
The impressive increase in rates decided by the European Central Bank (ECB) over the past 2 years to combat inflation impacts all rates applied by commercial banks to their clients and makes any loan more expensive.
The ECB’s interest rates increased by 4% between July 2022 and September 2023 to reach rates not seen since the establishment of the euro in 1999 (key rate at 4.5%).
Between January and September 2023, the increase in the average rate was almost twice as strong as over the same period in 2022 according to L’Observatoire Crédit Logement / CSA with an increase of 163 basis points in 2023 compared to an increase of 84 basis points in 2022.
The conditions for obtaining credit have also tightened in recent years, due to directives from the High Financial Stability Council (HCSF), which have forced banks to exercise more rigorous supervision when assessing the solvency of their clients.
In 2022, the number of bank loans granted recorded a drop of 20.5% compared to the previous year, according to data from the Observatoire Crédit Logement / CSA. In the first half of 2023, this activity fell by 46.4% compared to the same period of the previous year.
Most experts expect the situation to remain complex for several more years, although improvement is expected next year. The ECB should in fact keep its key rates high for a while longer as long as inflation has not fallen sustainably around its 2% target.
Is it time to sell your property?
The ideal time to sell a property is often difficult to determine, especially when the market is showing a downward trend. To make the best decision, it is important to consider several factors.
First, your personal goals.
You need to think regarding your financial and family needs. Do you have an immediate need for cash? Are family or professional circumstances pushing you to sell? Do you have the option to wait for the market to improve?
The condition of your property is another factor to take into account.
If your property requires major repairs or renovations, this might make it less attractive to buyers, especially in a down market. It may be wise to invest in improvements to increase the value of your property, but this must be carefully planned.
Also remember to analyze the supply and demand for housing in your area.
If the supply of real estate is greater than demand, this can put downward pressure on prices. However, some regions are more resilient to this trend than others.
Finally, it is important to consider the timing associated with the rental of properties considered “thermal sieves”.
As part of its plan for ecological planning, the French government has regulated the rental of thermal strainers. Rental bans for G-classified properties will, for example, come into force from January 1, 2025.
Should you consider purchasing a property?
If you anticipate a continued decline in real estate market prices in your area, it may be worth waiting before investing in the purchase of real estate.
However, it’s essential not to focus solely on falling prices when trying to determine the best timing to purchase real estate.
Your personal and professional situation, as well as your borrowing capacity and potential changes in interest rates, which might influence your ability to obtain a loan to finance your home, must also be taken into account.
The impact of energy performance on the French real estate market is also increasingly significant.
Those who have the means to buy a property without resorting to a loan might be tempted to take advantage of the fall in prices, particularly on properties considered to be thermal sieves, which many sellers seek to sell quickly.
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