Real Estate Crisis in France 2023: Fnaim Alert and Impact on Housing Market

2023-06-13 13:43:00

« Red alert on housing “. The words are out and come from the National Real Estate Federation (Fnaim) which warned of the crisis which is regarding to affect real estate in France in 2023, during its press conference dedicated to the results of the first semester 2023, this Tuesday.

The federation noted a 15% drop in real estate transactions over one year, in June, “ the second largest annual drop in sales since 1990 recalls the organization. This sudden slowdown in the real estate market has already caused an 84% increase in real estate agency bankruptcies between the first quarter of 2022 and the first quarter of 2023.

Real estate: first wave of bankruptcies for agencies

And if so far, prices held up with an average increase of 2.9% over one year as of June 1, 2023, across the entire French fleet following +6.3% in 2022 and +7% in 2021, the federation has also seen a major turnaround here: -1% over the last three months. ” It’s a brutal shock, especially for the price of houses which fell by 1.7% (compared to 0% for apartments, editor’s note) », warns Loïc Cantin, the president of the Fnaim.

In detail, some areas are more affected than others over the past three months. Paris shows a drop of 1.7%, rural municipalities by 1.6% on average and Île-de-France (excluding Paris) 1.4%. Conversely, the localities that are doing the best are the tourist coasts and ski resorts whose prices have risen by 0.6% over three months. since there are many second homes bought by households who already own them and who therefore experience much less difficulty with mortgages », explains Loïc Cantin.

« We have never experienced such a rapid rise in borrowing rates »

Because the downside of the problem is indeed access to credit. According to Fnaim, “ the morale of households shows that they are no longer in a purchasing dynamic and three times fewer French people believe that the economic situation is favorable than last year ».

And for good reason: mortgage interest rates have tripled in 18 months, reaching 3.5% over 25 years on average in June. ” We have never experienced such a rapid rise in borrowing rates “Alerts the president of the federation who affirms that over 18 months, the French have lost 40,000 euros in purchasing capacity, or 4% of their capacity for 2022.

This increase discourages some buyers and even prevents most of them from obtaining credit because of the scissor effect due to the wear rate. This maximum rate at which households can borrow, in order to prevent abuse, is behind interest rates since it was set in June at 4.68% for loans of 20 years and more. By adding fees and insurance, many borrowers see their annual percentage rate (APR) exceed the rate of wear and find themselves deprived of credit.

As a result, this brutal tightening of access to credit has led to a 31% drop in the volume of credit between 2022 and 2023. But if the Fnaim is worried regarding this dynamic, the Deputy Governor of the Banque de France Agnès Bénassy- Quéré affirmed, on June 8, that the fall in the mortgage market is due to a “normalization following the exuberant years of very low interest rates”, not a market crash.

A year 2023 which promises to be catastrophic

The visible reversal, for a few months, is only in its infancy according to the Fnaim which anticipates a drop in the purchasing capacity of the French of 7.5% in 2023. Rates will not be able to fall given the situation in Europe linked to inflation”, regrets Loïc Cantin who affirms that the only solution for a return to normal real estate transactions is to lower prices. ” It will be inevitable he hammers.

Thus, the Fnaim expects a fall of 5% in average prices in 2023 and even 6 to 7% for that of houses. Taking into account inflation estimated at 5% for the rest of the year, the federation estimates the fall in the real estate capital of the French at 10% in 2023 and ” this momentum will continue in 2024 “, adds worried its president.

This scenario is however not decried by all. ” There has been significant speculation in recent years and it is normal that sellers do not make a capital gain on their property now that the market is turning “, confides for his part Eddie Jacquemart, president of the National Confederation of Housing.

The government singled out by the federation

If the situation is largely due to the increase in the key rates of the European Central Bank, the federation accuses the government of not doing enough to limit the damage. She points to the conclusions of the National Council for Refoundation, issued by Elisabeth Borne to resolve the housing crisis

Housing crisis: a plan that solves nothing

If the government has accepted measures such as the relaxation of the rules for granting credit and the extension of the monthly review of the wear rate and the zero-rate loan, for Fnaim, this is far from enough. ” We were hoping for a real policy of refoundation and a government that is finally the courage to look into the housing crisis courageous but not measuring spoons that have nothing to do with the crisis », Asserts Loïc Cantin who assures that this plan « is not up to and at the level of France ». The towel is burning between the State and the professionals in the sector who are calling for help and are not satisfied with the answers provided for the moment.