Emerging from the COVID halt It may seem cruel to consider property and home prices as we emerge from a global health crisis, but what else do we have to speak about now that we have exhausted our Netflix and Amazon Prime watching lists? We may as well attempt to look ahead to 2022 with optimism and see what happens when our lives return to some kind of normalcy (hopefully).
The early signs are encouraging. The French economy is expected to bounce significantly from the Covid-19 health crisis in 2022. House prices in France are expected to rise by +3.5 percent in 2022, while French property sales are expected to remain at a robust 1 million for the year.
So, how has the Covid-19 problem influenced the French real estate market?
All indications indicate that the epidemic has had little effect on the French real estate market. Houses were purchased and sold at historically high rates in 2021. House prices in France have continued to rise (24 consecutive quarterly rises), and mortgage interest rates in France will reach their lowest position in over 50 years in 2021.
In this section, we examine current statistics and forecast the expected implications on the French property market in 2022. “Never make predictions, especially concerning the future!” they say. So, let’s see how we do with making a forecast regarding the French housing market in 2022. My forecast is based on three factors: housing data, economic changes, and local knowledge of the French property market.
France’s housing market in 2022
Property sales in France have increased significantly in several places since the lockdown was lifted. According to the official French statistics authority, INSEE, there was a dramatic downturn in the French property market during the COVID-19 lockdown, with almost no sales registered between March and May 2020, since most Real Estate businesses and Notary offices were shuttered. Since then, the French real estate sector has experienced rapid expansion.
According to the most recent French Property Market study produced by the national organisation of Notaires in France,
“At the end of May 2021, the amount of property sales (excluding new house developments) during the previous twelve months reached 1,130,000 transactions, a record high since 2000.”
According to Notaires.fr, the rolling 12-month average increase in French property prices in 2021 will be +5.9 percent. This demonstrated a minor slowdown, which was first observed in Q1 2021, when French home prices decreased to +1.4 percent from +2.4 percent in Q4 2020.
According to the survey, apartment price increases in metropolitan regions have halted, affecting the total price of housing (which again reflects the trend highlighted above of French people moving away from smaller properties in the big cities to larger properties in small towns). However, the analysis observed a large increase in house prices (with a notable +8.9 percent acceleration in house prices at the end of August 2021).
The survey also noted a rise in activity in the French new-build industry. Construction of multi-occupancy buildings (blocks of flats) grew by 11.8 percent in 2021, whereas individual residences climbed by 2 percent. [From Notaires France]
The French economy will recover in 2022.
Bruno Le Maire, France’s Finance Minister, recently told the French Parliament that by the start of December 2021:
“We have among the greatest economic growth rates in the eurozone, and we returned to pre-crisis economic activity levels three months earlier than planned.”
His remarks were supported by OECD data, which revealed that “French GDP is forecast to rise by +6.8 percent in 2021 before slowing to +4.2 percent in 2022 and +2.1 percent in 2023” [Source: OECD].
This optimistic view of the French economy’s future prospects is shared by noted American economist Paul Krugman. In the New York Times, he writes, “Among large advanced economies, the star performer of the epidemic period is arguably France.” For as long as I can remember, the American media has been persistently hostile about the French economy. Nonetheless, France’s economy is doing well.” [From the New York Times]
France’s response to the Covid epidemic was prompt and extensive. During lockdowns, large sums of money were spent to help homes and businesses. This kept the French economy running during the epidemic, and, more importantly, workers employed by their companies. As a result, according to Paul Krugman, there has been significantly less drop in corporate activity and lower consumer expenditure than in the United States and other nations (where the economy was shuttered down and small firms in particular fell by the way-side).
As a result of these efforts, the French economy returned to pre-Covid output levels in the autumn of 2021, considerably ahead of Germany, the United Kingdom, Italy, and Spain.
The official French statistics agency, INSEE, stated that the French economy grew by +18.2 percent in the third quarter of 2021. The French government’s exceptional stimulus support to safeguard salaries and furlough employees enabled household spending in France expand by +17.3 percent in Q3 2021. Foreign commerce also increased in the third quarter of 2021, with exports growing by +23.2 percent and imports increasing by +16.0 percent.
Furthermore, President Macron is spending an additional €100 billion euros in a green recovery plan in order to continue the economy’s recovery from the pandemic crisis and fulfil the tough Climate Crisis targets.
According to Bloomberg, France may be entering a “golden decade.”
Macron’s tax cuts, implemented early in his presidency, have helped restore French firm profit margins to levels not seen since before the global financial crisis. As a result, corporate investment levels are presently greater than they were before to the Covid-19 crisis, whereas Europe as a whole has yet to recover. According to the French Statistics Office, investment levels are presently barely around 25%. (of gross fixed capital).
French entrepreneurship is strong, with a monthly increase in the number of new firms founded (continuing the upward trajectory since 2017).
According to Ernst & Young, foreign investors are increasingly drawn to France, propelling the country ahead of the United Kingdom and Germany in terms of luring new investment projects and employment.
Unemployment has consistently declined over President Macron’s tenure, falling from roughly 9.5 percent of the workforce in 2017 when he took over from Francois Hollande, to 7.2 percent right before the pandemic hit in 2020, and currently standing at just more than 8.0 percent (unemployment rose to 9.1 percent during the pandemic as companies shed temporary staff and now stands at 8.1 percent in Q4 2021).
The French President may also refer to the fact that the ratio of new recruits on desired open-ended permanent work contracts (a requirement in France for easier access to homes and financing) vs fixed term contracts is up to 49 percent (it stood at 44 percent when he took office).
All of this leads to a bright future for President Macron as he prepares to run for re-election in 2022. With the French left almost completely demolished and the French right split between the hard-line mainstream right candidate (Valérie Pécresse), the more hard-line Marie Le Pen, and the extreme head-banger, Eric Zemmour, his ‘turf’ has suddenly opened up before him. He will pitch himself as the centrist’s rational continuity candidate, driving the economy in the correct way while opposing the insane fringe of anti-vaxers, anti-immigrants, and anti-everything. If Macron is re-elected, he will be the first incumbent to do so in France since Jacques Chirac 20 years ago. Sell Property in France To Overseas Investors