Towards spring in real estate? The first signs of revival.

Recently, the real estate market has shown the first signs of optimism, and many specialists, sellers, and buyers have felt a surge of hope. In an interview with L’Express, Yann Jeghanno, president of the Laforêt network, mentioned the "tremor" in the real estate market in the first quarter of 2024, emphasizing the importance of March and April for the industry. "The picture is changing, although it still remains fragile," he noted. "The recovery is happening slowly, but it is noticeable. Every month we see positive dynamics compared to last autumn," added Maël Bernier, a representative of the Meilleurtaux website. According to him, we are on the path to a more optimistic market, but without excessive enthusiasm.

The economic conditions for buyers have become more favorable compared to 2023. There is a decrease in prices in some regions, a reduction in mortgage interest rates, and banks are showing greater willingness to lend. These positive changes accompany the recovery of the market, which had remained quite sluggish just four months ago. The average interest rate on mortgages, excluding additional costs and insurance, dropped to 4.11% in February, according to data published by the Bank of France. For the first time since the beginning of 2022, the rate on new housing loans (excluding refinancing) fell by 6 basis points.

According to information published on March 5 by the CSA/Crédit Logement Observatory, interest rates have decreased from 4.24% to 3.99% from December 2023 to February 2024. "The drop in rates has both a psychological and a real impact on purchasing power," noted Bernier.

In their report on current trends, Laforêt professionals noted that the real estate market continues to adapt, recording an overall price decrease of -1.2% nationwide compared to the last quarter of 2023, when the cost reached 3,303 euros per square meter. "Although this price drop is moderate, it is an important indicator of the slight perception of changes in a fragile market," the agency cautiously adds.

The company Orpi reports that in the first quarter, the price per square meter across the country fell by 3% compared to the previous year. For Laforêt, this decrease was 4.7%; Century 21 reports a decrease of 3.2% for apartments and 3.3% for houses.

Experts note that potential buyers are being cautious. "We are seeing an increased level of activity in February, but since mid-March, interest has slowed down, and we are observing calmness," shares Anna Brétin Monara, director of the Guy Hoquet agency in Lyon, mentioning "hills and valleys." Although the listings posted by her agency receive a large number of views (sometimes over 1,100 clicks), this often does not lead to actual visits. One very popular listing may only generate three calls or email inquiries.

“These potential buyers are waiting, wondering whether prices will continue to drop, just like the rates,” adds Bretin Monara. She highlights the inactive housing market in contrast to the vibrant segment of older apartments, where there is a “noticeable revival.” For example, in the Place Jules Ferry area of Lyon, a 111-square-meter apartment was sold for 580,000 euros almost immediately after being put on the market.

From Laforêt's perspective, the first month of January was "quiet," while February was marked by the fact that "the French began to implement postponed plans or came up with new ones." Real estate trends reflected a slight national recovery with a 0.5% increase compared to the last quarter of 2023, indicating some stabilization after a sharp decline in 2023.

Among those observing the changes in the market, Stéphane Chemuli, the commercial director of the Procivis Ouest immobilier group, also notes a "thrill" in the market. "We feel that the market is starting to come alive," he happily shares.

Against the backdrop of a cultural return to active transactions, more and more sellers are realizing the need to rethink their expectations, given the price declines in several regions. "As of early April 2024, the GAPI index from Enchères Immo, which predicts the dynamics of the gap between sellers' expectations and buyers' offers, shows growing optimism: adjustments in interest rates are positively influencing buyer behavior," claims Louis Du Clary, one of the founders of the Enchères Immo website.

However, Laforêt notes that "some sellers continue to cling to inflated expectations." "Many of them are still tied to price levels from 18 months ago, when rates were much higher," Jehanne points out. As a result, sellers' overly high expectations are hindering them from selling their properties.

In addition, banks are gradually starting to activate mechanisms to boost the market. In an effort to attract buyers who have faced difficulties obtaining loans for the past two years, some financial institutions are organizing events to consult clients, analyze their creditworthiness, and perform financing calculations. "Banks are full of energy, they are competing with each other, and both borrowers and mortgage brokers have plenty of offers," emphasizes Bernier.

Nevertheless, for some, like Bretin Monara, the level of availability of bank loans is still insufficient. "Banks need another push to finally fulfill requests," she comments. The bank is still evaluating the submitted documents with particular care. "You need to have a very attractive credit profile," Jehanno asserts, adding that first-time buyers are still finding themselves in a difficult situation.

According to Laforêt, first-time buyers make up just over a quarter of all transactions (28%), while secondary buyers account for 54%. Investors represent 18% of the total number of transactions. In 2019, the share of first-time buyers exceeded 50%. According to the Bank of France, the volume of new housing loans in February fell to 7.3 billion euros, excluding refinancing, compared to 7.6 billion euros in the previous month. This figure has decreased threefold compared to the peak levels of spring 2022.

As Bernier emphasizes, "we hope that the most difficult stage is behind us." She believes that in September, rates could drop to 3.50% for 20 years. However, there is some caution regarding the future, as the recovery remains temporary for now. "We still do not have a clear housing policy that is needed to stimulate growth, and there is also a lack of new construction," notes Jan Jeghanno.

The construction sector is facing critical financial difficulties. Recently, it became known that Bouygues Immobilier, a subsidiary of the Bouygues group, plans to lay off 225 employees as part of social cuts. It has become the third major developer to announce such measures after Nexity and Vinci Immobilier at the beginning of this year.

Developers are under pressure from rising construction costs due to increasing prices for building materials and stricter environmental regulations, while demand is falling, which is linked to both a lack of access to credit and the gradual end of tax incentives. "Some are talking about the arrival of spring in the real estate market. I would say that this is just one swallow, and as we know, one swallow does not make a spring," summarizes Zhekhanno. Although the clouds are gradually clearing, there are still many obstacles before brighter days arrive.