French Real Estate Market: Factors Behind the Price Decline and Future Outlook

2023-07-28 03:00:00

After several years of sustained growth, mainly fueled by low credit rates, the French real estate market experienced a sharp slowdown since the end of last year. This situation can be explained by various factors, including rising inflation around the world, which led to a rate hike, and geopolitical tensions linked to the Russian-Ukrainian war, which exacerbated the surge in prices.

A fall in prices of 5% to 8% by the end of 2023

According to the forecasts of the site Meilleurtaux.com, this situation might lead to a fall in real estate prices by 5% to 8% by the end of 2023. This decline would affect both the old and the new markets, with a less marked difference for the latter, however. Nevertheless, some sectors might be less impacted than others, such as large cities where demand remains strong despite the crisis.

Multiple reasons behind this decline

The health crisis: the COVID-19 pandemic first caused a drop in activity and a downturn in the real estate market, in particular due to successive confinements and travel restrictions, before causing the market to explode during a good year of recovery.

L’inflation : the rise in consumer prices also affects the real estate sector and weighs on household purchasing power, making access to property more difficult.

Rate hike : in response to inflation, the ECB very sharply increased its key rate, forcing households to borrow at much higher interest rates.

Geopolitical tensions: the Russo-Ukrainian war has led to a surge in energy and raw material prices, which has a direct impact on construction costs and therefore the prices of new real estate.

What are the consequences for buyers and sellers?

This price drop might be favorable to potential buyers, who might take advantage of more advantageous conditions to acquire real estate. However, it is essential to remain vigilant with regard to the evolution of mortgage rates, because an excessive increase might cancel out the beneficial effects of the fall in prices on purchasing power.

Sellers, meanwhile, might see their margins shrink and may need to adjust their prices to align with the market trend. It is also important for them to offer quality and well-located propertiesin order to stand out in a competitive environment.

What future for the French real estate market?

It is difficult to accurately predict the future of the French real estate market, as the factors influencing its health are numerous and changing. However, it seems that the drop in prices expected by the end of 2023 is a reality to be taken into account, both for buyers and sellers. It is therefore crucial for them to closely monitor market developments and adapt their strategies accordingly.

Opportunities to seize despite everything

While this lower price backdrop may seem negative, it might also offer interesting opportunities for those who know how to take advantage of it. Thus, it is possible that some investors will take advantage of this situation to carry out operations at lower cost and obtain higher returns. Similarly, individuals seeking to acquire their main residence might benefit from better purchasing conditions and thus carry out their real estate project more easily.


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