Overview of the French Real Estate Market
The French real estate market has flourished in recent years, with transaction volumes reaching an all-time high in 2021. The market remains dynamic in 2023, with average prices in France increasing by 5.7% over the past 12 months. Rural areas will experience the strongest growth, with an increase of 8%. France’s largest cities have seen an increase of around 5%, with the exception of Paris, which has seen a decrease of 1.2%.
Real Estate Prices in France
A lack of properties has impacted the French real estate market, with the number of ads for houses for sale declining by 54% over four years. Demand for homes has remained strong, with prices rising 6.5% over the past 12 months. This trend has narrowed the gap between house and apartment prices, which rose 4.7%. The slowdown in house price growth suggests that the market may be stabilising.
Rising Interest Rates in France
The rise in interest rates in France has raised concerns about their impact on the housing market. The affordability ratio, which measures the ratio of a household’s income to loan repayments, is currently at 28%. Assuming the interest rate reaches 2.75% by the end of 2022, the average affordability ratio would remain at 30% this year, with 60% of major cities remaining below the 35% mark. Even if interest rates reach 4%, the affordability ratio would still be acceptable at 34%. However, the areas with the highest affordability ratios, such as Paris, Cannes, Antibes, Nice, and La Rochelle, will be most affected by the increase.
French House Prices in 2023
In 2023, house prices in France are expected to stabilise, with growth likely to fall below 5%. This slowdown will be most pronounced in major cities, where house prices have been growing more slowly due to a lack of supply. The south of France, particularly the Côte dAzur, has seen a significant increase in demand as buyers seek larger properties with more outdoor space. This trend is expected to continue through 2023, with increased demand for properties in the countryside.
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