Ever-higher mortgage rates and increasingly stringent conditions for access to credit, declining transaction volumes, longer negotiations, deterioration in buyer morale, increasing consideration of the constraints of the level of energy performance housing… All the ingredients seem to be in place to see a correction in the prices of existing real estate, which have again risen sharply this year (about +6% on national average) with the continuation of territorial redistribution in favor of cities average since some slight decreases are still observed in Paris or in other cities such as Lyon or Bordeaux.
Force of inertia of the real estate market
This general drop in prices hoped for by some buyers could however take time to materialize, in the opinion of the banking group BPCE, which only envisages a real decline in prices from the fourth quarter of 2023. On a national average, prices in the old would then settle down by -2.5% compared to the fourth quarter of 2022. The director of economic studies at BPCE, Alain Tourdjman, believes that the force of inertia in the real estate market will first result in a sharp drop in transaction volumes for old homes of around 10% in 2023 before a staggered and more limited price trend. About 1 million sales would still be recorded next year after a volume that would remain close to records this year around 1.12 million old homes. The BPCE group has also slightly raised its price outlook for 2022 and 2023 compared to a previous observatory established in July.
These forecasts find a certain echo in the perception of households because the latest BPCE survey of French people shows that a small majority of them continue to anticipate a rise in property prices (however in much lower proportions than ‘at the beginning of the year). Among French people with a certain heritage, the idea of price stabilization is now gaining ground.
Borrowing rates over 20 years between 3% and 3.2% at the end of 2023
Regarding the slowdown in the distribution of credit, which will be the primary cause of the drop in transaction volumes in 2023, the banking group is currently observing a relatively limited but asymmetrical development, as this mainly affects first-time buyers or first-time buyers. rental investment. BPCE believes that nominal borrowing rates will continue to rise to between 3% and 3.2% over 20 years at the end of 2023, i.e. a return to the level of 2014.
No crash
Despite the very significant decline in solvency caused by this gradual rise in rates since the beginning of 2022, when we were still close to 1%, Alain Tourdjman rules out any risk of a real estate crash in France because, according to him, the rates rise to 5% or 6% to consider such a scenario of a price drop of more than 20%. Alain Tourdjman emphasizes that we are simply witnessing a normalization of credit rates: ” I think we have to forget the 1% and get used to a return to a reference situation where borrowing rates take into account long rates and bank marginss”.
The green value will weigh more
Among the other factors that will weigh on real estate prices in 2023, BPCE cites the approximation of the rental ban deadlines for the most degraded housing (with an DPE F and G): the weight of green value will thus weigh more heavily on the valuation of these transactions. Conversely, the difficulties in the construction of new housing, with a limited supply and prices which continue to rise, are likely to maintain a transfer to the market for old properties. Finally, overall, the attraction of the French for stone is undeniable and real estate is still perceived as more stable than financial investments.