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.
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.
On choisit les meilleurs pour la France
Le ministre de la Santé : celui qui a eu les pires résultats dans la Covid
Pour la ville : le maire de Clichy Sous bois, là où les prix de l'immobilier sont au plus bas car personne ne veut y habiter
Sans parler de Lemaire, Darmanin ... pic.twitter.com/CvxjZ9toIM
— Les Patriotes 93 - Seine Saint Denis (@patriotes_93) September 7, 2022
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.
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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.
On choisit les meilleurs pour la France
— Les Patriotes 93 - Seine Saint Denis (@patriotes_93) September 7, 2022
Le ministre de la Santé : celui qui a eu les pires résultats dans la Covid
Pour la ville : le maire de Clichy Sous bois, là où les prix de l'immobilier sont au plus bas car personne ne veut y habiter
Sans parler de Lemaire, Darmanin ... pic.twitter.com/CvxjZ9toIM
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.
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