France real estate is experiencing a stabilization in new property prices, currently averaging 5,000 euros per square meter in 2024. As we look ahead to 2025, experts anticipate unexpected price developments that could reshape the market landscape. Stay informed about these potential changes and their implications for buyers and investors alike.
In the realm of France real estate, the year 2024 has ushered in a notable stabilization of new property prices, which have plateaued at an average of 5,000 euros per square meter. This halt in the relentless ascent of prices may come as a relief to prospective buyers who prioritize the energy efficiency of new constructions over the quaint allure of older homes, which often require extensive renovations.
After enduring a protracted real estate crisis characterized by soaring credit rates, the cosmic alignment of market conditions appears to favor those aspiring to purchase a new apartment. Over the past year, interest rates have exhibited a steady decline, coinciding with the stabilization of new apartment prices, as reported by the Federation of Real Estate Developers (FPI) on February 13. However, this average figure belies significant regional disparities; of the 26 urban areas scrutinized by the FPI, 17 experienced price declines in 2023. Some locales, such as Brest, Toulouse, and Orléans, witnessed modest decreases ranging from -0.4% to -3%, while others, including Tours and Montpellier, faced more pronounced drops between -5% and -8%.
It is crucial to note that the dynamics governing new property prices diverge markedly from those of the existing housing market. Unlike their older counterparts, new property prices are not solely dictated by the laws of supply and demand. They are also influenced by the escalating costs of land—an increasingly scarce commodity—alongside the persistent high prices of construction materials, exacerbated by post-COVID supply chain disruptions and geopolitical tensions, notably the conflict between Russia and Ukraine. Furthermore, new environmental regulations and taxation policies, including a VAT of 20% on new housing, complicate the pricing landscape.
As the market begins to show signs of recovery, there is palpable concern that prices may once again ascend. The fourth quarter of 2024 saw a remarkable 18.2% year-on-year increase in the number of new homes reserved for personal occupancy—albeit from a historically low base, with 9,333 units reserved. This resurgence in demand is likely to prompt developers to resume their search for land, albeit in a context marked by a scarcity of building permits, particularly in the lead-up to municipal elections, during which mayors typically issue fewer permits.
Moreover, the recovery is expected to catalyze a hiring spree among developers, who have seen their workforce diminish by approximately 6,000 employees over the past two years of crisis. This confluence of factors is poised to drive inflation in land prices and labor costs, which developers will inevitably need to incorporate into their sales prices to preserve profit margins.
Compounding these challenges are the new environmental regulations encapsulated in the RE2020 framework, which is increasingly applicable to a growing number of construction projects. These regulations are projected to inflate the cost of new housing by an additional 5% to 10%.
While the stabilization of new property prices in 2024 may provide a temporary respite for buyers, the intricate interplay of market dynamics, regulatory pressures, and economic recovery suggests that the landscape of France real estate remains fraught with uncertainty as we approach 2025.
