Property prices in France

Should you buy real estate in France in 2019?

Several indicators show that French real estate prices should start decreasing within a year, probably as a result of an interest rate increase decided by the European Central Bank.

Property prices in Paris: +51% in 10 years

In the past ten years, real estate prices in Paris, the capital, have increased by 51,2%. The square meter is now worth €10.000.

The market situation:

As of September 2018, the French residential real estate market is a continuation of 2016 and 2017. Indeed, prices have risen on average steadily since 2016: + 0.8% in 2016, + 1.7% in 2017, + 1.1% since 1 January 2018. Sales volume remains stable at its highest level: 960,000 transactions in 2017, 948,000 over 12 months to May 2018 (-1.25%). With more than 3 sales per year for 100 households, the market remains very fluid.

In Paris, the price increase is significantly stronger than at the national level: + 5.3% in 2016, + 6.7% in 2017 and + 4.6% over the first eight months of 2018, or +17, 5% since 2016 and + 41.5% for 10 years.

It should be noted, however, that in the first eight months of 2018, 35% of the 50 largest cities in France saw their average prices fall.

What to expect for 2019 and beyond?

Data presented here relies on comprehensive and rigorous indicators to build forecasts.

· An encouraging job market

First encouraging indicator: the fall in unemployment. Despite a sometimes ups and downs and a higher level than most major European countries, the trend of unemployment is on the decline which announces a positive trend in the medium term for the evolution of demand in the real estate market.

· Faster transactions

MeilleursAgents unveiled a new indicator of prime importance: the Median Sale Deadline (MSD), which measures the average number of days in which a property gets sold, and therefore the fluidity of the market. Based on a proven mathematical model, the MSDs are calculated over 3 rolling months from the opening and closing dates of pre-deduplicated ads, as well as the transaction feedback from the 11,000 real estate agencies present on the platform MeilleursAgents.com.

Thanks to this exclusive indicator, we see that sales duration continue to fall in all the cities of France with the exception of Bordeaux and Strasbourg. In big cities, the market is generally fluid or very fluid (39 days in Paris, 45 days in Lyon).

A high real estate purchasing power but struggling in some big cities

MeilleursAgents evaluates the real estate purchasing power of the French people, using:

• the average price of 1m² for each city
• median household income of 2 people
• 20-year mortgage rates
• a monthly loan equal to 33% of available income

This indicator is compared to the threshold of a decent dwelling, ie 36m2 for two people (18m² / person, which is the overcrowded threshold defined by INSEE).

Thanks to the low rates, the purchasing power of the French has increased significantly over the past ten years, rising from an average of 35 m² in January 2008 to an average of 52 m² today.

But the local situations are very contrasted and if the average national level is satisfactory, we find that the purchasing power is well below the acceptable standard in Paris (20 m²), Nice (31 m²), Bordeaux (32 m²) and soon in Lyon (37 m²).

The situation is more favorable in the other big cities: Marseille and Rennes: 49 m², Toulouse and Nantes: 48 m², Lille: 47 m², Strasbourg: 46 m², Montpellier: 45 m².

Mortgage interest rates at a halt

The purchasing power of French people has been boosted since 2011 by the continued decline in interest rates. But this seems to have come to an end with rates at the lowest, which will probably not fall anymore. The rise in prices at national level (+ 1.7% in 2017 on average in France) is thus gradually eroding the purchasing power of the French. But no warning in the short term because it remains high overall and argues for a continuation of the current market dynamics.

A future crisis?

Several indicators point that a change of cycle is likely, within a year. The feeling of real estate agents who see that the balance of power balance between buyers and sellers is changing, that the durations of mortgages can no longer increase, and the probable rise in interest rates by the European Central Bank clearly announce a turnaround predictable for the summer of 2019.

Evolution factors and one-year forecasts of MeilleursAgents.com for Paris and the ten largest cities in France are detailed in the table below. Even if it is in French, you might consider that what matters the most is the column called “Perspective”. Also interesting, the column “Pouvoir d’achat” (purchasing power) which tells how many square meters an average buyer can purchase.

Sources:MeilleursAgents