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Is now a good time to buy a home in France?

Looking to buy your dream home in France, but not sure whether it is a good time? Here's a look at the current state of the property market and the financial factors that you will need to take into consideration.

Is now a good time to buy a home in France?
Photo by MOHD AZRIN on Unsplash

For most people the decision on when to buy a house rests more on personal factors – getting a new job, retiring, starting a family etc – but you still want to make sure that it’s a good time financially.

Here’s a look at the factors that are currently influencing the French property market.

The French economy

Amid rising inflation and a cost of living crisis due to the ongoing war in Ukraine, French officials, such as Bank of France governor Francois Villeroy de Galhau have begun issuing warnings that the country may be headed for a “limited recession” next year (2023). 

Meanwhile, the European Central Bank (ECB) announced an unprecedented increase in its key rates (0.75 points) on Thursday. This decision marks the biggest interest rate rise in the ECB’s history, as the eurozone economy attempts to cope with inflation.

Whether or not the market is currently in your favour depends largely on whether you plan to purchase your French home with a mortgage or without one, as well as the currency that your assets are in. 

Buying with a mortgage

It is most likely not a good time to begin the process of buying a home in France with a mortgage, though of course this depends on your individual financial situation and employment status.

As the ECB increases key rates, interest rates in France are also expected to rise, explained Laurence Scialom, a professor of economics at the University of Paris Nanterre to Franceinfo

In France, average borrowing rates had already risen from 1 percent in January to 1.9 percent in early September. These rates could reach 3 percent by the end of the year, according to estimates by France télévisions. 

Additionally, lending requirements – which were already strict – are set to become more stringent. Between spring and fall of 2022, nearly one out of two mortgage applications were denied.

For first time buyers, buying will become even more complicated. The president of the Century 21 network, Charles Marinakis, told Le Monde that “first-time buyers could be pushed out of the market” because living wage is “a determining factor for obtaining a loan.”

Scialom explained that for banks, the cost of living crisis will necessitate stricter requirements for loan applications “because many people will face an increased financial fragility.”

Buyers in precarious financial situations will also have to strongly consider the presence of other fees and taxes. 

Buying without a mortgage

If you are looking to purchase property in the coming months, but you plan to do so mortgage-free, then your situation is very different to the one described above. 

If France does indeed enter a “limited depression,” this would likely lead to a decrease in real estate prices, making it cheaper for you to buy. 

Additionally, if you are American, you could benefit the euro to dollar exchange rate. The single currency is currently trading at near parity with the dollar, which is the lowest level in over a year. In comparison, on January 1st of 2021, the exchange rate was €1 EUR = $1.2134.

However, the ECB’s goal with raising key rates was in part to increase the strength of the euro to the dollar. It is possible the exchange rate will begin to move toward a stronger euro in the coming months. While the exchange rate will not return to 2021 levels over night, it would still be advisable for Americans looking to buy in cash to take advantage of the current exchange rate while it is still in place. 

Property prices in France

The association of French notaires published a report on September 6th, which indicated that during the last year the price of houses and apartments in France has increased by nearly 7 percent.

When looking at 2021 trends, apartment prices increased by approximately 5.2 percent, while houses went up 9 percent, according to Nexity. These figures tend to confirm the trend of buyers seeking out homes in the countryside rather than apartments in city centres in the periods following lockdowns during the pandemic.

These tendencies remained somewhat present in 2022 as well. Specifically by region, the Provence-Alpes-Côte d’Azur département saw real estate average prices per metre increase by 15.5 percent between 2021 and the first half of 2022. Brittany also saw large increases (+13.2 percent). 

In Hauts-de-France, Pays de la Loire, and Île-de-France (excluding the city of Paris), prices decreased marginally by 0.1 percent, 0.2 percent, and 0.4 percent respectively. 

MAP Where you can buy a house in France for less than€100k

The table below shows the evolution of prices for apartments in Ile-de-France, according to French daily Le Parisien, as of September 1st.

When looking ahead, the European market as a whole “remains characterised by a limited real estate supply and a still strong demand for housing” explained chief economist for S&P, Sylvain Broyer to Le Monde.

“Supply is very inelastic in relation to demand, and when demand falls, many sellers withdraw their properties from the market rather than sell at a price lower than their expectations; this is typically the case in the Paris market and in the major capitals.”

The economist predicts that property prices across Europe – and including within France – will rise more than household incomes in 2024. He expects that rising interest rates will be particularly problematic for “first-time buyers, young people and less well-off households.

As for Paris specifically, prices are increasing at a lower rate than the other parts of the country. The real estate firm Meilleurs Agents released data showing that as of September 6th, 2022, real estate prices in Paris had decreased by 1.2 percent in one year. 

Other costs

As well as the price of the property, there are some other costs to take into account, the biggest of which will probably be the notaire fee.

Despite its name, only a small portion of the notaire fee goes to the notaire handling your sale, the rest goes to the state so really it’s a property tax.

CALCULATOR How to work out your notaire fee

There’s also the costs associated with the purchase such as real estate agent fees, and once you have the property you need to remember to budget for the two annual property taxes.

REVEALED The hidden costs of buying property in France

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France earns €148 million in tourist taxes from Airbnb

As tourists made their way back to France in 2022, many stayed in Airbnbs, helping to more than double the country's earnings from its 'tourist tax' when compared to pre-pandemic levels.

France earns €148 million in tourist taxes from Airbnb

One of the world’s most visited countries – tourism in France rebounded in 2022, led by droves of American and British tourists who excitedly made their way back to l’Hexagone after several years of travel restrictions. In June, for the first time since the beginning of the pandemic, Paris and greater Paris region returned to pre-pandemic (2019) hotel occupancy levels.

It was not just hotels who welcomed back customers in 2022, however. Airbnb rentals also increased – so much so that the platform Airbnb paid €148 million in tourist tax to French municipalities in 2022, according to Le Parisien.

This amount represented an increase of 60 percent when compared to 2021, according to Airbnb.

The holidaymaker – or tourist – tax was first introduced in 2018, and it is proportional to the number of nights spent in a property and is paid by the tenants at the end of their stay. It is paid twice a year to the local council on behalf of the hosts, professionals and individuals.

The specific rate of the tax depends on the nature of accommodation, which includes its classification (star rating), as well as the rate voted on by the municipality.

As for 2022, it was paid out to over 23,000 French municipalities.

For furnished accommodation, municipalities typically set a rate of between one percent to five percent of the nightly price per person, which usually corresponds to just a few euros per trip. 

France’s 2022 tourism boost 

“The year 2022 marks the recovery of tourism across the whole of France,” Emmanuel Marill, Director of Airbnb France, told Le Parisien.

Airbnb saw a significant rise in the total number of rentals in France for the year 2022, which they classify as the period between November 2021 and October 2022, when compared to both 2021 and 2019 (pre-pandemic).

France more than doubled its earnings from the tourist tax in 2022 (€148 million) when compared to the €58 million in 2019, performing better than 2021 as well, when the country collected €93 million from the tax.

Unsurprisingly, it was the city of Paris who received the most from the tourist tax – at least €24.3 million.

READ MORE: Bail mobilité: How France’s short-term rental contracts work

This also represents a significant increase – a jump of 158 percent – when compared to 2021, when the city collected €9.4 million.

Paris is not the only French city to have received more funds from the tourist tax though – Marseille collected €2.8 million, compared to the €1.9 million from 2021, and Nice collected more than €2.4 million, compared to more than €1.2 million in 2021.

Corsica also collected a significant amount in the tourist tax – about €3.7 million in total across Corsican municipalities, according to Franceinfo

Non-urban parts of France were not forgotten either – about 30 percent of the earnings from the tourist tax went to rural communities – or localities with less than 3,500 inhabitants. 

“Tourism in France is also rural,” the director of the Association for Rural Mayors of France, Cédric Szabo, told Le Parisien. “Many people are seeking the calm and the outdoors for their French vacation.”

Szabo pointed out that rural travel in France has great potential for tourism, even in places that do not have a primary attraction, like “Mont-Saint-Michel or Les Baux-de-Provence.”

The head of Airbnb France also went on to tell the French daily that the rental platform is “increasingly benefiting a wide variety of communities every year.”

“Whether they are located in the heart of or on the outskirts of major urban areas or in the French countryside, more French municipalities have additional means to develop their tourism offering and promote their territory over the long term,” he said.

Criticism for Airbnb

However, despite the increase in tax revenue, many cities have criticised the expansion of of bed-and-breakfasts thanks to platforms like Airbnb or Booking.

READ MORE: What are the rules on renting out French property on Airbnb?

Residents often accuse the platforms of causing a housing shortage which negatively impacts those who live in these towns year-round.

In response to these concerns, several town halls have put in restrictions for renting out a property with Airbnb. Renters are increasingly required to declare their rentals to the town hall.