After a year of high inflation and sluggish sales, house prices are decreasing in France, but the most recent data suggests that the decline is slowing down in certain regions. We investigate the need of waiting for sellers or purchasers.
In 2023, the French housing market faltered; while home prices in Hauts-de-France, Normandy, and Occitanie were steady, the Notaires de France reported 20% declines in sales in those regions.
The biggest real estate brokerage in France, Century 21, said in January that “prices have to go down” in 2024 to revive the home industry that was in decline.
As of right now, early indications in 2024 support declining pricing. To be sure, they began to decline in Paris last year, but notaire data from January shows that the trend has subsequently expanded throughout the nation, with prices falling below the rate of year-on-year inflation everywhere.
Are property prices continuing dropping?
A recent research on sales prices by online estate agency Meilleursagents.com shows that while prices are still falling nationwide in relation to year-on-year inflation, the pace of the decline seems to be moderating.
The price decline in Paris, which was ahead of the national trend, was 0.7% in November, 0.6% in December, and just 0.3% in January. Five other cities had their rates fall in December but then stay the same in January. Price increases in Lyon during the first month of the year were 0.1%.
“It typically takes two or three months for the market to recover at the start of the year after a traditionally sluggish final quarter,” said Meilleurs Agents in its study.
“This recovery seems to be starting far earlier in 2024 than it did in the previous year. By contrast, Paris property values fell in January 2023, just as they did in November and December of 2022.
Property price changes from December 2023 to January 2024:
However, the Meilleurs Agents study shows that price declines in rural regions have been even faster, falling 0.3% in November 2023, 0.5% in December, and 0.6% in January 2024.
Good indications from the European Central Bank
The European Central Bank (ECB) said on January 25 that it will maintain its three main interest rates at the same levels. “To ensure that [year-on-year] inflation returns to its 2% medium-term target in a timely manner,” the ECB said in a news statement.
“Allowing banks to fluidify their mortgage offers,” was how Banque de France’s Franck Sédillot greeted this action.
The ECB further announced that these essential interest rates will be cut in June. French banks had already started the year by lowering their mortgage rates by 0.2 points. Another early indication of recovery is that, according to a BFM Business article, banks are beginning to ask for smaller mortgage deposits than they did in December 2023.
The average deposit in February 2024 is €54,798, down from €64,942 in December 2023—a €10,000 drop.
It seems from the overall picture that property prices will probably start to normalise in metropolitan regions in the next months, then in rural areas, and maybe even recover from the third quarter of 2024.
The French property market, renowned for its diversity, charm, and investment potential, is poised for further growth and evolution in the coming years. Several key factors will shape the market dynamics and influence future trends.
1. Continued Demand from International Buyers
France’s allure as a desirable destination for international property buyers remains strong. Its rich cultural heritage, stunning landscapes, and high quality of life continue to attract investors seeking both lifestyle benefits and financial returns.
- Brexit Uncertainty: The ongoing uncertainty surrounding Brexit has led to an increase in interest from British buyers seeking a safe haven in the European Union.
- Remote Work Trends: The rise of remote work has fueled demand for second homes and vacation properties in France, as buyers seek to combine work and leisure.
- Lifestyle Factors: France’s reputation for its cuisine, wine, and cultural heritage remains a significant draw for international buyers.
2. Rising Interest Rates and Mortgage Costs
The European Central Bank’s monetary policy, including interest rate hikes, will likely impact the French property market. Higher mortgage rates can reduce affordability and slow down demand, particularly for first-time buyers.
- Affordability Concerns: Rising interest rates may make it more challenging for some buyers to afford properties, especially in high-demand areas.
- Impact on Rental Market: Higher mortgage rates could lead to increased rental prices as landlords pass on the costs to tenants.
3. Urban Renewal and Regeneration
The French government’s ongoing efforts to revitalize urban areas and promote sustainable development will continue to shape the property market. Projects such as the “Opération Coeur de Ville” aim to regenerate city centers and improve quality of life.
- Urban Regeneration: Investments in infrastructure, housing, and cultural amenities will enhance the appeal of city centers and drive property prices.
- Sustainable Development: A focus on sustainable construction and energy-efficient buildings will become increasingly important, influencing buyer preferences.
4. Short-Term Rental Market
The short-term rental market, fueled by platforms like Airbnb, has gained significant traction in France. While it has contributed to tourism revenue, it has also raised concerns about regulation and competition with traditional hotels.
- Regulatory Changes: The French government may introduce stricter regulations for short-term rentals to address concerns about competition and tourism management.
- Impact on Residential Market: The popularity of short-term rentals can influence property prices and availability, particularly in tourist hotspots.
5. Regional Variations
The French property market is characterized by regional variations, with different areas experiencing varying levels of demand and price growth. While Paris and the French Riviera remain highly sought-after, other regions, such as the Bordeaux region and the French Alps, are also experiencing increasing interest.
- Regional Trends: Factors such as tourism, economic activity, and infrastructure development will continue to influence regional property markets.
- Emerging Destinations: Smaller cities and towns with natural beauty or cultural heritage may see increased interest from buyers seeking a more affordable and authentic lifestyle.
Overall, the French property market is expected to remain resilient and attractive to investors in the coming years. While challenges such as rising interest rates and economic uncertainties may impact market dynamics, the country’s strong fundamentals, cultural appeal, and investment opportunities will continue to draw buyers from both domestic and international markets.
