Sebastien Laye: No, the real estate crisis in France is not over.

Sébastien Laye: The crisis in the real estate market in France is not over yet.

Economy

Chronicle. Unlike those who confidently declare the end of the housing market crisis without any foresight, the situation in this sector in France remains tense, significantly impacting economic activity and the overall state of affairs among the French. A description of the situation was published on April 18, 2024.

For specialists in the field of economics, analyzing trends in the real estate market is an important element for understanding the economic and social foundations of any society. I follow developments in this area not only because I have experience working in the real estate finance sector, but also because this issue affects the political and macroeconomic situation in the country. A well-known saying goes: "When construction is fast, everything is good!" However, in reality, after many years of decline in construction and a year marked by a crisis in the housing sector, some government representatives and leading economists confidently assert that the crisis in the real estate market is behind us, and recovery is on the horizon.It's important to stay critical.to such optimistic and often hasty statements.

In my report from March 2023 for the Thomas More Institute, I warned about the impending crisis in the real estate sector, which we are now witnessing. It is incorrect to highlight the end of the crisis in the real estate market and the persistence (or beginning?) of the housing and construction crisis that is being discussed by major media outlets, as such an undeserved assessment is at least simplistic and erroneous. Supply issues began long before the last two years, and the outlook remains bleak in the near term, as more needs to be created.400,000 new housing units annually...and we remain far from achieving this goal.

Mortgage rates continue to remain high.

The "first economic ability" for citizens to acquire housing in France is still under threat, as high interest rates (which have not significantly impacted prices due to a lack of supply) remain in place, and prices, although slightly decreased, continue to be unaffordable for a significant portion of the population.

What should I pay attention to?

Recent global data on real estate showssustained price growth over the past twenty years...which is due to the active increase in money supply since the early 2000s. Despite a recent nominal decrease, real estate prices in France remain disproportionate compared to the long-term growth of wages and living expenses. According to a study by Natixis, since 1990, relative real estate prices in relation to consumer prices in France have increased by...80%Inflation has only slightly brought these two curves closer together, and a significant part of the current inflation in France is caused specifically by the increase in rental rates (the prices of the properties themselves are not included in our inflation index).

Creating a proposal that meets the needs

It is critically important to remember that the crisis in the real estate market is not resolved, but has merely changed. Problems persist not only in price regulation but also in creating offerings that meet the real needs of citizens. Deep reforms in housing policy are necessary, aimed at increasing supply, improving quality, and making housing more accessible, as stated in my report for 2023.

In conclusion, it would be extremely unwise to celebrate the supposed end of the crisis in the real estate market in France. A deeper analysis of the situation and concrete actions are required to successfully address the ongoing issues.The treatment for this area is still far from being complete.and the responsibility for this lies with government authorities, economists, and the citizens themselves, who must remain vigilant and actively participate in the search for sustainable solutions.