While many uncertainties weighed on the housing market during the health crisis, those who predicted a difficult time for the market last year have been proved spectacularly wrong.

Sales

The agents report a record volume of transactions in the year, estimated at around 1,200,000 sales. That compares to 1,067,000 in 2019 and 1,024,000 in 2020, a year marked by the COVID-19 crisis.

Most of this increase in sales has occurred in medium-sized cities, the outskirts of large cities as well as rural areas.

As is customary, the agents point to the safe haven status of property during a time of uncertainty, but other reasons for the buoyant market are cited:

• A continuing very low level of interest rates;

• The catch-up effect from the impact of confinement;

• The growth in teleworking as a result of Covid;

• Overall higher savings than before the crisis;

• Strong investor interest;

• A lower level of unemployment;

• High demand for second homes.

All the agents highlight the significance of low interest rates, with Century 21 stating: "Undoubtedly, historically low rates have galvanised the market. Not only have they enabled some of the most modest households to pass the real estate purchase course, they have encouraged first-time buyers to take the plunge, and they have also allowed second-time buyers to realise their wishes to improve their quality of life, made a priority after the various lockdowns."

Investors also appear to be piling into the market, accounting for at least 25% of sales.

Prices

Agents estimates of the national average increase in prices do vary marginally, but all show significant rises, as can be seen from following table.

The assessment from FNAIM, the national association of estate agents, compares with their previous figures of +6.6% in 2020 and +3.3% in 2019 for houses, whilst for apartments it compares with +6.3% in 2020 and +4.7% in 2019.

Not only has demand been strong but there has also been a shortage of property on the market, as we described in our article House Price Rises in France.

In part, this has been due to a desire by those with a house and garden to conserve that privilege, and to uncertainties amongst owners about the viability of buyers to realise the sale.

Laforêt Immobilier report that outside of Paris there was a reduction of -16% in listings for houses and -4% for apartments. They state that:"Never has the stock of housing for sale been so low."

Although the Orpi chain of estate agents do not offer price movement estimates, they state that: "Today, almost everything sells. The concern for our agents currently is not having enough properties for sale or rent. And the lack of supply is still fueling the inflationary push in the market."

Laforêt also highlight a supply shortage in the new-build market, stating that: "With the cessation of many construction sites in 2020 and, today, difficulties in the supply of materials the new-build market is struggling."

Geographical Differences

All the agents report that geographical rebalancing continues, with fewer sales in the most expensive cities, notably Paris, but much more dynamic in seaside towns, medium-sized towns and cities and rural areas.

FNAIM state that whilst prices stagnated over the year in Paris, elsewhere they increased significantly:

• +6.7% in the 10 largest cities (excluding Paris);

• +8.4% in medium-sized cities;

• +12.2% in seaside resorts;

• +8.6% in ski resorts;

• +7% in rural communes.

Some areas saw substantially higher price growth, particularly in some seaside towns and in rural areas, on which we will report at a future date. Paris may well be the most expensive place to live, but it is now the peripheral areas, medium-sized cities and rural areas that are moving the market.

Laforêt Immobilier consider that the causes of the under-performance of Paris are mainly Covid related - the break out from Covid and the absence of international buyers during the pandemic. However, they also consider investors are concerned about the impact of rent controls, and recent legislation on combating climate change, which will require substantial upgrading of a great deal of the housing stock to meet energy efficiency standards.

Jean-Marc Torrolion of FNAIM considers that if the urban exodus announced by many observers remains questionable in its real magnitude (a view shared by all the agents), it is undeniable that the demand of the French in terms of housing has evolved. "The trend of recent years of forced metropolitisation, encouraged by the public authorities, is being undermined. The French are turning to peripheral cities and rural areas, preferring to enjoy larger spaces, closer to nature, even if it means increasing travel times."

That is a view echoed by Laforêt Immobilier who state that: "The inhabitants of large cities have experienced successive lockdowns badly and aspire to more space and quality of life." Orpi similarly consider that: "New behaviors are taking hold in France and leading to a new real estate map. City dwellers are looking for a better quality of life, increasing demand in small and medium-sized towns in France. "

Amongst the most popular areas have been Brittany, Normandy and Nouvelle-Aquitaine. According to Century 21, house prices increased by +13.2% in the Nouvelle-Aquitaine region, +12.5% in Brittany and 11.9% in Normandy. Price increases were more moderate in Hauts-de-France (+5.2%) and Bourgogne-Franche-Comté (+5.9%).

Several provincial towns and cities are seeing their prices explode. This is the case notably for Brest, La Rochelle, Orléans and Le Havre where there were double digit increases in prices.

Elsewhere, there was only a moderate increase in prices in towns and cities where they had already risen sharply and were already high, while others that had relatively low prices experienced a catch-up effect due to the increase in demand.

Outlook

As might be expected, there is a strong degree of caution amongst the agents about the outlook for 2022 onwards.

Amongst issues that pre-occupy them are the outlook for inflation and the prospect of an increase in interest rates, due to their impact on living standards.

There is also concern about the toughening of insulation and energy efficiency standards for homes, which they consider could well take out a lot of investors out of the market.

Likewise, the toughening of bank lending rules that was introduced last year, making it an requirement that the debt/income ratio of borrowers cannot exceed 35% and the duration of the loan no longer than 25 years, could well have an impact on investors and households on more modest incomes.

Conversely, the growth in teleworking is likely to encourage residential mobility and to allow more households to buy larger homes away from the cities. The French have come to see their homes not only as living spaces, but also as places of work in their own right.

Agents are also optimistic about the economic outlook, with France in a strong position compared to many of its competitors, which should stimulate investment in the residential market.

In due course we shall be reporting on the notaires perspective of the year, a more definitive and detailed assessment, but which they have yet to release.

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