Paris real estate market: evolution and outlook FEV 2023
The French real estate market and in particular the Parisian market are experiencing significant changes that have not been seen for many years.
To understand this, you have to go back to the Covid-19 pandemic, on MAR 17, 2021 the French are confined for 47 days, when they come out of confinement, sales literally explode, boosted by historically low mortgage rates (2021 and 2022 have experienced historic sales volumes by breaking records) and by an increased demand for real estate with outdoor spaces. The market destabilizes in 2022 because of inflation, which has indirectly raised interest rates on borrowings (through anti-inflation policies of central banks for which the increase in the "cost of borrowed money" is the main tool for controlling inflation).
Interest rates averaged 1% in FEV 2022 and rose to 2.5% in DEC 2022, in addition to the higher cost of borrowing, banks are also asking for higher down payments than one year more early.
Lower prices in Paris: a first for more than 15 years
Real estate prices in Paris fell by an average of 1.2% in 2022 according to the Best Agents barometer, the president of the FNAIM also said that prices should "continue to fall in 2023". This is mainly linked to the increase in the cost of credit and the reduction in the number of loans granted by banks (35 to 50% less in 12 months), which had the effect of “freezing part of the market”. Overall the prices have not dropped except in Paris and in a few big cities for the moment.
Outlook 2023
Prices are unlikely to rise, demand is falling due to the reduction in the number of loans granted by banks and the real estate market has a strong inertia, in other words it takes time to react to changes, the fall in demand will have to have an impact on prices (we hear of reductions of 2% to 5% over 2023 in Paris at the most). The volume of transactions should also decrease. The average holding time for real estate in France is 7 to 9 years, knowing that 2021 and 2022 were years with record transaction volumes, we can expect the real estate transaction market to become calmer in the years to come.
Long-term outlook and historical trends
For buyers who do not need to resort to a mortgage, the current market offers opportunities for price negotiation as well as the increasing possibility of bargains, the market having turned around in 2022 in Paris. Truly exceptional opportunities may appear which have not been seen for about 15 years.
In the medium and long term, the Parisian market, which is stronger and more resilient than other markets without international buyers, should return to its historical trends after the crisis and the end of the war in Ukraine. So even with a slight drop in Parisian prices in 2023, if we look at the long term 10 years for example, we can reasonably expect to see prices increase and to realize a capital gain on the sale price obtained at after 10 years of ownership or more. This would correspond to the long-term historical trend of price growth on the Paris real estate market. The risks of a bubble are relatively low, the solidity of the Paris market with its international dimension as well as its historical trend of price growth, makes it one of the safest investments among the major cities in Europe over the long term.
If you wish to invest or sell Paris and/or France, contact us to find out more about our prices, networks, services and international strategies.
Author: Sylvain Talvan 21 FEB 2023
TALVANS.COM Talvan's International Real Estate.
SOURCES : BAROMÈTRES MEILLEURS AGENTS :
UBS INDEX DE BULLE IMMOBILIERE ( cliquez pour acceder au rapport complet )
PWC - Emerging trends in Real Estate Europe 2023 (Cliquez pour accéder au rapport complet)
