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Inside the Market / Market Stats

French real estate market sustained chiefly by advantageous mortgage rates

Mortgage

In MeilleursAgents’ latest barometer of residential property prices, the current health of the French real estate market is chiefly attributed to exceptional loan conditions.

MeilleursAgents 79th monthly barometer finds that advantageous mortgage rates, which have decreased again by 0.2% during February, are encouraging buyers to purchase homes. In addition, the market has entered its high season where investors, families and first-time buyers are prospecting for property.

The results are based on sales agreements signed between 1 and 29 February 2016, which will turn into concrete sales in the next three months.

Sébastien de Lafond, CEO of MeilleursAgents explains that “the dynamics of the real estate market in this early part of the year is largely conditioned by lower interest rates.” The 0.2% decrease of mortgage rates in February compared to January result in a mechanical increase of buyers’ purchasing power of 1.6%, according to the website.

This can allow them to buy 1.6% more surface area for the same price, or withstand a 1.6% hike in prices without it affecting their monthly payments.

Transaction volumes increased significantly in 2015 with over 803,000 sales, 15.7% more than in 2014. However, MeilleursAgents remain cautious, explaining that the level of demand is still insufficient and that 2 prospecting buyers for every 1 property for sale are needed for the market to become fluid once again — in Paris this currently stands at only 1.3 buyers for every property.

Also contributing to a lack of stability in the real estate market is France’s high rate of unemployment, which continues to grow, with the drop in the number of job seekers in January deemed purely “artificial.”

However, despite the “somewhat artificial nature of the recovery witnessed in the last year” and more particularly in February, the current market is the most fluid it has been in the past five years.

Prices in Paris, Île-de-France and in major cities across France rose on average by 0.3% in February compared to January 2016.

MeilleursAgents also note a “seasonal” increase in real estate activity on large surfaces — 3 rooms or more. This is explained by families seeking their new homes from now, so that they are ready for the next school year starting in September. This has led to large apartments seeing their prices increase by 0.4% in February after a stable month in January.

Conversely, small areas — studios, one bedroom and two bedrooms —whose prices grew by 0.6% in January saw this trend slow, with prices increasing by a mere 0.2% in February.

Photo credit: Flickr / GotCredit

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