What’s happening to house prices in France amid the coronavirus crisis?

France’s housing market bounced back after being temporarily sedated during lockdown, but that doesn't mean there hasn't been a lasting impact on prices - here's how the effects are being felt.

What's happening to house prices in France amid the coronavirus crisis?
Photo: AFP

While France's economy at large is reeling from the impact of the pandemic and lockdown, the property market appears to have quickly regained its feet.

In fact, just after the easing of the strict nationwide lockdown in May, France saw a record-high national interest in investing in property, according to an analysis of the French housing market published in June by the Notaires de France (a body gathering French notaries nationwide).

One of the reasons, the report stated, was that property guaranteed a security for the buyer that they could not easily find in other investments.

But the peak in sales was also boosted by deals that had been initiated before lockdown in March, according to the report.

So with uncertain times ahead, both health-wise and economically speaking, what is the future for the property market in France? 

Paris prices to rise less than expected

Paris has long been the by far most expensive city in France when it comes to buying property and prices have seen a steady increase for a decade now.

The average price per square metre in the capital is currently at €10,593, according to Meilleurs Agent, an agency analysing the French property market.

In comparison, one square metre costs €4,980 on average in Lyon, €2,943 in Marseille and €2,990 in Montpellier, according to the agency.

However, the health crisis seems to have put brakes on the continuous price surge in the capital, with Meilleur Agents predicting a growth rate of between 0 and 2 percent between now and September 2021.

Overall, property will get more expensive in Paris as a whole over 2020, according to the agency's most recent report, although the price hike will be less than what they expected before Covid-19 hit (the average price in the capital was set to surpass €11,000 per square metre in 2020).

Adrien Helle, co-founder at Vendmy, a digital real estate agency in Paris, said that prices and the capital were set to stagnate in the coming months.

“Prices have already started to slightly decrease in some arrondissements in Paris,”  he told The Local.

The reason was a drop in demand, which Helle said would push owners to lower their prices.

“Although there was an increase in demand in July and August, September has been calmer and people seem more reluctant to buy at a really high cost,” Helle said.

Paris suburbs to get pricier

Helle also said more buyers were eager to swap city life for more greenery.

“There has been an increase of a certain type of Parisian who wants to sell their properties to buy smaller ones and then be able to invest in another property two or three hours away from Paris,” he said. 

This could contribute to an increase of prices in the capital's inner and outer suburbs, he added.

Property prices in the inner suburbs (Petite Couronne) are set to increase by 9 percent, while the outer suburbs (Grande Couronne) could see increases of 6.1 percent for flats and 7.6 percent for houses respectively, according the analysis by Les Grands Notaires de Paris.

Big cities popular in general

Despite a general post-lockdown trend of people wanting more space, French cities continue to  remain an attractive destination for buyers seeing as they offer the most job opportunities.

“The 'going back to the countryside' myth collides with the reality of the job market,” Franck Vignaud, President of Le Laboratoire de l’immobilier (a body of experts studying the market of newly built properties) told The Local.

“With the economic crisis looming in and business bankruptcies piling up, employment is going to concentrate around big cities, especially for young people looking for their first job,” Vignaus said, adding that the télétravail (remote working) trend did not fundamentally change this scenario.

“Everyone cannot work from home,” he said.

Lyon most popular post-lockdown

Looking at the numbers, they seem to confirm this trend.

In their report, Meilleur Agents outline the price changes in France's 10 largest cities from March 15th to September 1st, comparing them with the preceding six months (before lockdown).

The only three cities seeing a general slump in the real estate market after lockdown were Toulouse, Paris and Marseille.

On average, property prices in Toulouse, Paris and Marseille dropped by 0.5, 0.4 and 0.5 percent respectively in the six months following lockdown, down from a rise by 7.1, 5.1 and 4.1 percent the six months preceding lockdown.

In the remaining seven cities prices continued to rise, albeit at slower speed than usual. The biggest price hike was in Lyon, where prices increased by 1.9 percent on average the past six months (compared to 4.9 percent the six months preceding lockdown).

Here is a map with the details:

Photo: Meilleurs Agents

What about the future?

Looking at expectations for the year to come, Meilleur Agents outlined the northern city Lille as the big winner.

Property prices in Lille are set to increase by between 2 and 4 percent on average between now and September 2021. Prices in Lille rose by 5.8 percent on average between September 2019 and  March 2020 and continued to grow by 0.5 percent on average in the six months that followed.

On the other hand, Montpellier and Nice on the popular French Riviera in the south, were outlined as the biggest future losers, with a predicted price stagnation or decrease between 0 and 2 percent in the coming year.

Nice and Montpellier saw prices rise by 3.9 percent and 4.1 percent respectively in the six months between September 2019 and March 2020. Any slump in the real estate market in these cities means future buyers could make relatively good deals in the coming months.

Favourite cities

In July, real estate agency Seloger asked where the French would like to move to. Here are the top seven cities:

1.     Aix-en-Provence (Bouches-du-Rhône)
2.     Bordeaux (Gironde)
3.     Biarritz (Pyrénées-Atlantiques)
4.     Vannes (Morbihan)
5.     Nantes (Loire-Atlantique)
6.     Toulouse (Haute-Garonne)
7.     Montpellier (Hérault)

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Tax hikes of up to 60% for French second home owners

Towns and villages through France are raising property tax rates for second-home owners, with many areas voting for the maximum 60 percent increase.

Tax hikes of up to 60% for French second home owners

Even though France’s taxe d’habitation (householders’ tax) is in the process of being phased out for most French residents, second-home owners are still required to pay it.

This year more towns have voted to increase it, and others have recently gained the ability to add a surcharge for second-home owners, with French daily Le Parisien reporting that the residence tax “continues to soar.” 

Municipalities in zones tendues (areas with a housing shortage) have the ability to choose to increase taxe d’habitation by up to 60 percent for second home owners.

From 2023, several new areas – including Nantes – will join the list of zones tendues, meaning they will be able to vote to increase taxes for second-home owners.

This year, large cities such as Bordeaux, Lyon, Biarritz, Arles and Saint-Jean-de-Luz saw their city councils vote to increase the tax at the maximum 60 percent.

READ MORE: Why some French cities are increasing taxes for second-home owners

Some areas have still not chosen to apply the increase, but those looking to buy a second home in France should beware that these municipalities could vote to increase the taxe d’habitation in the future.

In 2020, cities on average voted to increase the residence tax on second homes by 248.50, in comparison to €217 in 2017. This year, that amount is expected to be even higher.

On top of the taxe d’habitation, second-home owners also have to pay the separate taxe foncière property tax, which is itself rising sharply in many areas.