Mortgage rates continue to rise and should not stop immediately. For several market players, this phenomenon could contribute to a drop in real estate prices. Enough to lower prices and market tension? Not so sure.
If you are looking for a house or an apartment to buy, the trend has not escaped you: real estate prices are still rising throughout the territory, except Paris. In the first quarter, prices per square meter increased by 3.7% over one year according to Lafort, 6% according to Orpi and 8.2% according to the National Real Estate Federation (Fnaim). For its part, the LPI-SeLoger Barometer released in early April notes that prices continue to rise in 93% of major cities.
An increase that Pascale Sciacalugua, deputy director of the Crdit Coopratif network, explains as follows: It should be noted, however, that we had a year record production of real estate loans in 2021, with abnormally low rates, which favored the rise in property prices.
Goods sell more slowly
However, several market players are leaning towards lower prices in the months or even weeks to come. At issue: the rise in mortgage rates since January (from 1% to 1.45% between January and April for a loan over one year according to the broker Empruntis). This is the case, for example, of Sylvain Lefvre, director of the Centrale de Financement: Rates are on the rise. This means that borrowers will be able to borrow less and therefore negotiate the good they covet. Opposite, the seller may first try to sell it at its price, but if he is faced with the negotiation, he may end up accepting.
The figures of the LPI-SeLoger barometer seem to prove him right. The combined effect of the return of inflation, the next presidential election and the questioning of some French people about the preservation of their purchasing power is leading to a slump in real estate market activity in France, notes the barometer, which continues: In February, sales fell by 9% to settle nearly 22% below their long-term average. In the end, the number of old homes acquired by individuals over the last 3 months is down 13.4% year-on-year. Proof of this slowdown, the Central Finance noted an increase of 10 to 15% of relay loans. This is a sign that properties are selling more slowly, assures Sylvain Lefvre.
save up to 50% on your borrower insurance
Another argument that would suggest a drop in prices, the return to negotiations, in the order of 5 to 7% of the price of the property depending on the city, again according to LPI-SeLoger. Sellers are starting to realize that they are no longer selling within half an hour and as easily as before. Even if you don’t go from a seller’s market to a buyer’s market overnight, there is a slight relaxationswears Sylvain Lefvre.
Sellers are starting to realize that they no longer sell within half an hour
He also believes that the cost of energy will affect certain goods. For two years it was the eldorado towards the houses away from big cities. But the rise in prices, especially of fuel, can keep borrowers away from these homes. On the other hand, for the areas already stretched today, Sylvain Lefvre concedes that if they do not fall, prices will undoubtedly slow down.
Still, this swing in interest rates/lower prices does not convince everyone, starting with Mal Bernier, spokesperson for the broker Meilleurtaux: I am cautious, because the rise in rates today remains well below 2% and should not change the market too much. An increase of 1% to 1.45% for a loan of 200,000 euros over 20 years, represented 40 euros more per month. So this is not going to fundamentally change the real estate market.
Real estate loan: who would benefit from a change in the method of calculating the wear rate?
For her, the fall in prices will only occur on the less demanded goods, while the interesting goods will continue to be sold. And the slowdown in the market shows on the contrary that sellers have no interest in selling. Those who have a project do not put their property on sale until they have found their next property. There is no snowball effect, goods will circulate less.
For a loan of 200,000 euros over 20 years
With a rate of 1%, the borrower will have to repay 920 euros per month, ie a cost of the loan of 20,749 euros, excluding insurance.
With a rate of 1.45%, the borrower will have to repay 960 euros per month, for a credit cost of 30,520 euros. That is 9771 euros difference.
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