Dn the real estate sector, erroneous analyses, presented as truths of common sense, unfortunately largely pollute the debate. They prevent us from understanding what is at stake and where the real levers of political action lie. One example among others: housing prices would be linked to the level of interest rates, we hear. Our research over the long term shows that this is not correct.
Housing prices have little to do with interest rates and this is quite easy to explain. Thus 75% of people who own their homes have actually finished repaying their credit. When they resell their property to buy another, they do not need to go into debt. Only 10 to 15% of owners, first-time buyers during the first years of repayment, are really concerned by interest rates.
The very significant differences between the real estate dynamics of the various French regions clearly show that the rates, which are homogeneous throughout the territory, are not the main determinants of real estate prices. Here is a second false assertion: increasing the volume of construction is a way of bringing down housing prices in tight areas.
The mechanics of supply and demand
Supporting statistics, we show the absence of a relationship between the rate of construction and the evolution of prices. It is a question of order of magnitude. There are 38 million homes in France and around 350,000 are built every year. Starting work on 100,000 more only changes the thickness of the line. If we really wanted the prices of the old to fall thanks to the construction effort, this effort would have to be multiplied by ten. Which is out of reach.
Finally, the notion of “tight market” to which reference is very often made also complicates understanding of the mechanisms at work in real estate. By asserting that the demand for housing would be greater than the supply in certain territories, we justify, once again, new constructions.
But supply and demand always adjust in reality, with a small delay, through price changes. And faced with prices judged, rightly, as too high in certain geographical areas, other policies are possible than an increase in local supply.
Strengthening “metropolisation”
In particular, public action has the power to encourage people to settle in areas with more accessible prices, by acting to create jobs there and increase their attractiveness. We know that many French people would like to live in small towns. It can be favored. This is what used to be called land use planning!
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