France Real Estate: FNAIM Forecasts 6% Sales Increase

France Real Estate: FNAIM Forecasts 6% Sales Increase

The FNAIM projects a 6% rise in France real estate transactions, estimating 825,000 sales by year-end. Uncover the latest market developments.

The France’s real estate market finds itself ensnared in a multifaceted crisis that has been exacerbated since the onset of the Covid-19 pandemic in 2020. A confluence of factors has contributed to an unprecedented surge in insolvencies, particularly evident in 2024. While the health crisis may appear to be a distant memory, its ramifications continue to reverberate throughout the France’s real estate market.

In 2019, the market experienced a remarkable boom, with property sales surpassing one million transactions. However, the advent of Covid-19 precipitated a significant regression from which the sector has struggled to recover. Over the past four years, potential buyers have adopted a decidedly cautious stance, a sentiment rooted in the lingering effects of the pandemic. This hesitancy has been compounded by the European Central Bank’s (ECB) decision to raise key interest rates in 2022, resulting in less favorable conditions for real estate loans. The average borrowing rate surged from a mere 1.13% in March 2022 to a staggering 4.2% by December 2023, effectively paralyzing both sellers and prospective buyers. As one industry expert aptly noted, “When you go from 1 to 4%, it seizes the market.”

The employment crisis, a direct fallout of the health situation, has further instilled a sense of caution among the French populace, leading to a marked decrease in borrowing since 2020. Additionally, an uptick in divorce rates and a scarcity of raw materials have contributed to the stagnation of property sales. The number of building permits has plummeted, with numerous developers shuttering their operations and investors retreating from the market in response to rising interest rates. Since 2019, approximately 5,000 real estate agencies have succumbed to bankruptcy, including a staggering 1,245 closures in 2024 alone.

According to real estate experts, the repercussions of the 2020 crisis have manifested in a “scissors effect” and a “delay effect,” with the most pronounced consequences emerging from 2022 onward. As if misfortune were not enough, these factors have also precipitated a sharp increase in rental prices between 2021 and 2023, with the rent reference index escalating from 0.9% in 2022 to 1.63% in 2023. In light of this inflationary trend, the rental market has been adversely affected. Nexity, France’s leading real estate developer, reported a notable decline in transactions in 2023, with approximately 950,000 sales recorded—a 15% decrease compared to the previous year.

The issue of housing quality has also come to the fore, particularly concerning “thermal sieves.” In 2021, 9% of rental properties were withdrawn from the market, a trend not offset by the construction of new housing. This decline in new builds can be traced back to 2017, when 438,000 new homes were constructed, a figure that dwindled to 288,000 by 2024. The year 2024 stands out for its dismal record, with only 146,000 new homes built—an alarming contrast to the 321,000 constructed in 2006 or the 193,000 in 2020.

The France’s real estate market has become increasingly deregulated, with the elimination of zero-interest loans for houses and a reduction for apartments, leaving potential buyers in a quandary. Tax incentives, such as those provided by the Pinel law, have either vanished or been significantly curtailed, further dampening sales. This has created a vicious cycle, exacerbated by the absence of a budget vote for 2025, which has left both buyers and sellers in a state of indecision. Projects awaiting financing have experienced delays, stalling sales and rentals.

However, a glimmer of hope emerges for 2025. The FNAIM (National Real Estate Federation) has projected a modest increase in transaction volumes, estimating a rise of 6%, which would bring sales to approximately 825,000 by year-end. This uptick, albeit modest, could signify the first steps toward a sustainable recovery. The FNAIM also noted a decline in borrowing rates, which fell from 4.2% in December 2023 to 3.37% in November 2024, with expectations of a further decrease of around 3% in 2025.

As the sector begins to sense an improvement, particularly towards the end of 2024, there has been a notable shift in seller behavior, especially in cities poised to host the Olympic Games. Many property owners have opted for seasonal rentals, anticipating a more favorable selling environment in the autumn of 2024. The market has shown signs of revitalization, with an uptick in new property listings and sales during October and November—a period typically characterized by stagnation. This resurgence has instilled a sense of optimism among real estate experts, suggesting that the sector may be on the cusp of a much-needed recovery.

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