For those anticipating a downturn in the real estate market as interest rates rise, the numbers seem to prove them wrong. At least for now. While mortgage loan production remained dynamic in the first quarter — even if the share of wealthy households increased at the expense of first-time buyers, according to Observatoire du Crédit Logement/CSA — property prices in older residences continued to rise.
In the first quarter of 2022, the increase was 7.3% over one year, according to the Notaires-Insee Index, a benchmark in the real estate sector (and 1.5% compared to the fourth quarter of 2021). This indicator is based on actual sales. This increase is still driven by single houses, whose prices are rising faster than apartments (+9.3% in one year versus +4.7%), and the province, while Ile-de-France is showing signs of shortness of breath.
Prices in the region around the capital “only” increased by 2.5%, while in the rest of the country they rose by 9.3%. In Paris, prices have continued to erode, with an average price of €10,520 per square metre, but transactions have returned to the level before the health crisis. According to notaries, prices should be stable by July.
Nationally, the number of deals, which exploded at the end of containment mid-2020, has leveled off, rather than at a relatively high rate. Thus, notaries record 1.75 million transactions from April 2021 to March 2022. If we relate this number of transactions to the available housing stock, which is increasing by about 1% annually, then the percentage of sales since 2019 has exceeded the high level observed at the beginning of the 2000s , confirms the press release.
For notaries, the observation is clear: the real estate market is far from collapsing. Joint result with Governor of the Bank of France, François Villeroy de Gallo. “If the price hike occurs in a gradual and orderly manner, I think, there is no need to fear a major reversal in this sector.”He said this morning while presenting the annual report of the Prudential Control and Dissolution Authority (ACPR).
However, the European Central Bank recently warned of the risks of a correction in the eurozone real estate market, a fear that was already confirmed by the supervisor at the end of last year. But market conditions can vary greatly from country to country, with increases being more pronounced in some countries, such as the Netherlands or Germany, or the weight of variable rate loans (in France, almost all loans are at fixed rates).
“The dynamism of mortgage lending remains strong in France”, the governor of the Bank of France, who thus rejects criticism from some real estate professionals about the risks of expulsion from the market for a portion of clients after the implementation, and is now mandatory for banks since January 1, adds the rules of the High Council for Financial Stability (HCSF) governing the conditions for granting credit. François Villeroy de Gallo defines “all banks strictly applying these rules”.