The decline in real estate prices in France has really begun.

The decline in real estate prices is gradually sweeping across France, although the trend is still underwhelming as sellers incorporate the new conditions, with interest rates on loans increasing every month for more than a year now. It is only recently that the sharp rise in rates has begun to have an impact, manifesting itself in an increase in the number of unconfirmed real estate acquisition projects.

Conditions for granting loans

When rates rose from 1% for 20 years to 2%, the effect was primarily psychological, but when they reached 3%, the obstacle was the debt-to-income ratio, which became insurmountable for some households. Today, as we approach 3.5% and even 4% for 25 years,''we are starting to "look for problems", the decline in the volume of loans granted is so significant that some mortgage professionals are sounding the alarm, calling for a review of the rules of access to credit (an effort ratio of 35% and a maximum loan term of 25 years in the secondary real estate market). However, according to the BPCE banking group, it is only a scenario with interest rates of 5% or 6% that could cause a real immobilization crisis, that is, a fall in prices of more than 20%.

Prices have to be corrected for a long time.

The real estate valuation specialist Meilleurs Agents has already talked about a "real change point" as early as the end of 2022, but at first this was mainly in large metropolitan areas where high prices make credit costs more''difficult to get around. Meilleurs Agents notes today that the entire region has moved into negative price levels, including many medium-sized cities and rural areas, although the fall in prices is still small. As usual, inertia in the real estate market is making prices take longer to adjust, first coming the lengthening phase of transactions as many sellers are still insisting on their demands.

The worst is never certain.

It looks like price declines will continue, but the worst is never certain.

The worst is never certain. It may even be that the rise in mortgage interest rates will soon come to an end if the decline in inflation is confirmed, allowing central banks to halt key rate hikes or even moderate them afterwards.

Lyon lags behind, Nice fights back

In the meantime, Meilleurs Agents is noticing a new falling cycle, which is particularly noticeable as the beginning of spring is traditionally characterized by an upswing in transactions. This year, however, the unfreezing has not yet occurred. Let's take a closer look at the major cities: the platform that connects buyers and real estate agents notes price increases only in Nice, Strasbourg and Lille in the first three months of the year. With an achieved average of 2.1% and 5160 euros per square meter, Nice has risen to the level of Lyon, the only two major cities remaining above the 5000 euros per square meter mark after Paris. In contrast, Lyon (-3.3%), Toulouse (-2%),''Marseille (-1.8%), Paris (-1.5%) and Bordeaux (-1.3%) have felt these price declines most strongly since the beginning of the year.

"This decline in prices is not normal and, on the contrary, indicates the health of the market, which is adapting to the new economic and banking conditions", emphasize Meilleurs Agents. It is necessary to treat with a certain relative weight, because at the moment the prices of the 10 largest cities in France are still rising by about 32% over the last 5 years.... Even in Paris, prices continue to rise by about 10% over the last 5 years and 23% over the last 10 years.

Real estate prices in major cities (as of April 1, 2023)

source: Meilleurs Agents

• Average price per square''meter
Changes in the first quarter of 2023
• Change in 2022

• 10 177 euro
• -1.5%
• -1.2%

• NIC
• 5 163 euro
• +2,1%
• +6,5%

• LION
• 5 162 euro
• -3.3%
• -1.4%

• BOR
• 4 865 euro
• -1.3%
• -2.9%

• N
• 4 201 euro
• -1%
• +2%

• NAN
• 4 097 euro
• -0.1%
• +2.7%

• TRAC
• 3 970 euro
• +1.1%
• +0,9%

• MARCEL
• 3 885 euro
• -1.8%
• +14,1%

• 3 703''euro
• -2%
• +2,5%

• MONT
• 3,547 EUR
• -1,1%
• +7%

• LILL
• 3,470 EUR
• +0,4%
• +2,8%

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