Explore the paradox of France’s real estate market, where soaring prices challenge sustainability amid declining new home sales. What lies ahead?
The French real estate market is currently experiencing a paradox: while the number of new homes sold is dwindling, prices continue to soar to unprecedented heights. According to the Federation of Real Estate Developers (FPI), the average price for new apartments sold to individuals has reached nearly €5,200 per square meter, reflecting a 1.5% increase over the past year. This situation raises questions about the sustainability of the market and the implications for potential buyers and investors.
Declining Sales Amidst Price Increases
The first quarter of 2025 has been particularly challenging for the new housing sector, primarily due to the termination of the Pinel tax scheme, which previously incentivized rental investments. This policy change has led to a significant reduction in the participation of individual investors in new construction projects. However, there is a silver lining: sales to owner-occupiers have seen a notable increase of nearly 10% year-on-year, buoyed by more favorable borrowing rates and the initial effects of the extension of the zero-interest loan (Prêt à Taux Zéro, PTZ) introduced in April.
Despite this uptick in owner-occupier sales, the overall figures paint a grim picture. Total sales of new homes—including apartments sold to individuals, block housing, and serviced residences—plummeted to fewer than 20,000 units in the first quarter of 2025. This represents a 10% decline compared to the same period last year and is nearly one-third below the average sales level recorded by the FPI Observatory between 2018 and 2024 for the first quarter.
Unsold Inventory and Developer Challenges
Adding to the concerns is the alarming statistic that more than a quarter of the homes marketed remain unsold. Currently, the number of new homes available for sale barely exceeds 12,000 units, a stark contrast to previous years when the market was more robust. This situation has forced many developers to withdraw their projects from the market due to low marketing rates, which hinder their ability to secure financial guarantees for completion. Banks are increasingly requiring a minimum level of reservations before granting financing, further complicating the landscape for developers.
Record High Prices
Despite the decline in sales, the real estate market is witnessing record-high prices. The average price for new apartments sold to individuals has reached an all-time high of almost €5,200 per square meter. This increase is particularly striking given that, although some buyers benefited from discounts last year, average prices have consistently hovered around the €5,000 per square meter mark. Notably, the decreases in prices that were observed primarily affected the Île-de-France region. In the first quarter of 2025, the FPI reported significant price recoveries in cities such as Le Havre, Reims, Dijon, Orléans, and Lyon, indicating a broader trend of rising prices across various urban centers.
Potential Solutions: The Role of Private Landlords
In light of these challenges, there is hope for revitalizing the new housing market through legislative changes aimed at enhancing the status of private landlords. The President of the FPI has suggested that, with rapid legislative action, this could lead to the production of at least 40,000 additional new rental housing units annually. Such a move could provide a much-needed boost to the market, addressing both the supply shortage and the growing demand for rental properties.
The current state of the French real estate market presents a complex scenario characterized by declining sales and rising prices. While the increase in owner-occupier sales offers a glimmer of hope, the overall decline in new home sales and the significant number of unsold properties raise concerns about the market’s future. As developers face mounting challenges, the potential introduction of supportive measures for private landlords could play a crucial role in revitalizing the sector. Stakeholders will need to closely monitor these developments to navigate the evolving landscape of the French real estate market effectively.
