Real estate: what can we expect in 2024, after a year marked by the crisis?

Real estate: what can we expect in 2024, after a year marked by the crisis?

The year 2023 is not quite over yet, but for real estate professionals it will undoubtedly remain one of the darkest on record in France. Between the decline in the purchasing power of the French, hit by inflation and the increase in interest rates, the sharp increase in construction costs, new energy standards or the tightening of conditions for access to credit, the sector has experienced an “annus horribilis”. According to French notaries, “between 850,000 and 890,000 transactions” should take place.

The year 2023 is not quite over yet, but for real estate professionals it will undoubtedly remain one of the darkest on record in France. Between the decline in the purchasing power of the French, hit by inflation and the increase in interest rates, the sharp increase in construction costs, new energy standards or the tightening of conditions for access to credit, the sector has experienced an “annus horribilis”. According to French notaries, “between 850,000 and 890,000 transactions” should be carried out this year, compared to 1.13 million in 2022. Is there an improvement possible in 2024? Experts give their opinion.

Will interest rates fall?

One of the main causes of the current crisis is the spectacular increase in interest rates, from 0.99% over twenty years in December 2021 to 4.26% in November 2023, according to the Housing Credit Observatory/CSA. Why this explosion? To curb inflation, the European Central Bank has implemented ten consecutive increases in its key interest rate since mid-2022, dragging banks along in its wake.

But since October, there has been a stabilization of ECB interest rates, linked to the slowdown in inflation. What should you take into account in case of a decline in 2024? Some experts are considering this as early as the end of next year. But Ingrid Nappi, real estate economist and professor at the École des Ponts ParisTech, calls for “caution”: “I am quite pessimistic about the geopolitical situation and its consequences for the economic situation,” she notes. Inflation has not stabilized yet, so I think we can expect interest rates not to fall anytime soon. »

On the way to a price drop?

In this context, many specialists point out that real estate prices are not falling as quickly as they should. According to the latest reference index from Notaries-Insee, these fell by 1.8% on an annual basis in the third quarter of 2023 for the first time since 2015.

A lasting trend? Secretary General of the Union of Credit Intermediaries (UIC), Bérengère Dubus does not believe in a general decline in prices: “We have some declines in the big cities, but I think we will not see a huge decline in the peri-urban areas. she assures. It is the rarity that determines the price. If we make access to real estate difficult, especially with the Zero Net Artificialization of Land law, which means we can no longer build in certain places, then people are willing to pay more. The government has created the shortage and cannot ensure that prices fall due to the shortage. »

Ongoing crisis in new construction

The new construction sector is one of the sectors most affected by the crisis. According to the French Construction Federation, construction has fallen by 22% in one year, with 286,000 construction starts expected in 2023, the lowest level since 1992. Ingrid Nappi is not very optimistic for the coming year: “We must see that we are arriving at a new paradigm,” she warns. We know very well that we will no longer build but renovate. It’s not easy to hear, but you have to get used to the fact that we are no longer building as much as before. »

Easier access to credit?

Reluctant when interest rates rose, several banks closed their credit channels. According to the Banque de France, real estate loan production has fallen below 10 billion euros per month since August, which is unheard of for more than seven years. But the stabilization of interest rates observed since October gives them more visibility, and an easing started at the end of 2023 and is expected to continue into 2024.

“Inflation has calmed down a bit, the ECB announcements suggest that we are reaching the end of the phase of sharp interest rate increases, so it is normal that banks are calmer and start lending again,” assures Pierre Madec, real estate economist at the French Observatory for Economic Conditions (OFCE).

The new rules for zero interest loans (PTZ) could also make it easier to obtain money. All eligibility criteria for this PTZ have been revised, as have the rates, applicable income scale and areas covered. Finally, it should be noted that the update of the usury rate (maximum rate at which a bank may lend money, editor’s note), which became monthly in February to adapt to the rapid increase in interest rates, will again be quarterly in February should be. 2024.

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