Real estate crisis in France: a 5% drop in prices by 2023.

On June 14, 2023, the National Real Estate Federation (Fnaim) raised an alarm about the real estate crisis in France and warned of an impending significant crisis in 2023. Difficulties in accessing loans, a decrease in transaction volumes, and bankruptcies of real estate agencies are alarming signs of this crisis, despite the government's attempts to rectify the situation.

In its press conference regarding the results of the first half of 2023, Fnaim expressed its concern about the state of the French real estate market. The federation noted a 15% decrease in the volume of real estate transactions over the year, marking the second most significant decline since 1990. This market downturn has led to an 84% increase in bankruptcies among real estate agencies from the first quarter of 2022 to the first quarter of 2023.

Despite the decrease in the volume of transactions, property prices continue to rise at an average annual rate of 2.9% as of June 1, 2023. However, the last three months have seen a decline of 1%, with a more significant drop for houses (1.7%) compared to apartments. The areas most affected by this decline are Paris, rural districts, and Île-de-France, while coastal areas and ski resorts are coping better with this trend due to existing property owners purchasing secondary homes.

Throughout the year, the network of agencies predicts an average price decrease of 5% (and between 6 to 7% for houses).

Access to credit is an important issue. Access to mortgage loans remains a serious problem.

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According to Fnaim, French families are no longer interested in buying property, as three times fewer French people believe that the economic situation is favorable compared to the previous year. The decline in confidence is linked to the tripling of mortgage interest rates over 18 months, which reached an average of 3.5% for a 25-year term in June 2023. This increase in rates has reduced the purchasing power of the French by 40,000 euros over 18 months, which is 4% of their capacity in 2022. Many borrowers have found themselves unable to obtain credit due to the effects of credit restrictions. This situation has led to a 31% decrease in loan volumes between 2022 and 2023. According to Fnaim, although the situation is partly related to the increase in the European Central Bank's base interest rates, the government has not taken sufficient measures to mitigate the effects of this crisis.

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