After a record year in 2021, French estate agents are reporting that with property buyers now confronted with surging inflation, a decline in purchasing power and a continuing shortage of properties for sale, the market is starting to cool.
In the first quarter prices continued to rise significantly - up +3.7% according to Laforêt, +6% from Orpi and +8.7% according to FNAIM, the national association of estate agents. The notaires have yet to publish their review of the market in Q1, although earlier this year they were forecasting a potential rise of up to 10% for older housing.
In many provincial towns the market has been on fire. Orpi report that towns such as Dax and Vannes have seen prices increase by 26% over 2021. It has been much the same for cities in the south that continue to attract new population flows, such as Toulon (+23%) or Perpignan (+20%).
The only major city to see a fall in prices has been Paris, down 4% in Q1 pushing average prices back under €10,000m2. According to market analysts Meilleursagents, "The time when the capital and the ten largest agglomerations played the role of locomotive seems well and truly over. From now on, it is the rural areas which record the highest price increases."
The graphic below shows average prices and the movement in prices in the past year in 21 towns and cities.
Source: Orpi
After two years marked by the pandemic, Orpi report that the trend that emerged during the crisis for a detached home and outside space has now become a permanent feature of the housing market, but that due to rising prices many are simply unable to realise their dream.
Not only is demand coming up against soaring prices, but there are also tougher rules on access to mortgage credit and an increase in interest rates, factors that are now imposing significant constraints on many households, forcing some buyers to adapt their desires to their budget.
All the agents report a shortage of properties on the market, with Guillaume Martinaud, President of Orpi commenting that, "Beyond the increase in selling prices, which has become widespread throughout the country, the offer is still lacking. The increase in prices combined with the lack of supply marks a slowdown (-17%) in sales volumes this first quarter compared to 2021".
Their view echoes that of the French notaires who earlier this year considered that the volume of sales of older property appeared to have stabilised.
Against the backdrop of the war in Ukraine, an increasing number of buyers are more vigilant about energy consumption, with many now looking at the distance of a property from the transport infrastructure or their place of work and others opting for a slightly smaller home to keep down their energy bills.
Orpi consider that buyers are preferring to wait until they have more visibility on the political and economic context before entering the market, an uncertainty that will have only been partially relieved with the re-election of centrist politician President Macron.
In a survey of their members last month, the notaires found that 42% forecast a decrease in sales this year, against 31% two months ago, and 10% against 22% previously to believe they would increase.
Nearly 30% of notaires in the survey were anticipating a fall in prices, against 13% who thought prices would increase. The majority considered prices would stabilise.
Related Reading:
