As a result of the high prices in French cities, the real estate purchasing power of the French in these cities has declined since the Corona virus crisis. According to broker Pretto, who studied about 130,000 transaction simulations in the 10 most sought-after medium-sized cities on his platform, for the same budget between May 2020 and May 2022, the surface area loss ranges from 6 to 21 square meters!
General price increase
With demand rising, driven in part by the arrival of residents of large cities, with high purchasing power, Chartres, Le Mans, Limoges, Lorient, La Rochelle, Metz, Nîmes, Sete, Tours and Valence have seen a sharp rise in the prices of their properties, Brito notes. The increase was especially noted in La Rochelle (+53%) and Lorient (+46%).
Nor is it limited to these ten gatherings. A study on Action Cœur de Ville showed that real estate sales increased by an average of 20% in 2021 in 222 municipalities in the system, and prices there rose by 7.5% in one year. One year!
Purchasing power disparities
An easily tolerated increase for Parisians buying in a medium-sized city due to the purchasing power of the property being nearly twice the purchasing power of the residents of that same city. The same note, for newcomers from other major cities, with purchasing power 1.12 higher than that of the current resident according to the broker’s data on different incomes.
“Even if the movement of the population of megacities shows a renewed attraction of medium-sized cities, the population is the first to suffer from this situation, Explains Pierre Chabon, Prieto President. In the face of rising property prices in their cities, those who want to become homeowners are at a disadvantage compared to newcomers whose purchasing power is greater than their own. They can already give away the most valuable possessions of their city. »
According to simulations, a local buyer profile in an average city with a net monthly income of €3,400 and an average real estate budget of €220,000 per household, with a contribution of €32,000, where the “Parisian” buyer is in the medium-sized city She has a net monthly income of €5,800 for a property purchase budget of €364,000, with a down payment of €59,000.
Hard to get loans
Added to this loss in purchasing power are the current difficulties families face in obtaining a mortgage from their banks: with higher interest rates on mortgage loans, as a result of government bonds, but the usury rate has not changed (the maximum legal rate, including all costs, which financial institutions can grant to individuals), many applications from candidates to join were rejected. Some banks are even already putting the kibosh into accepting new files from brokers.
Between now and the end of the year, real estate prices are unlikely to stabilize as European Central Bank President Christine Lagarde confirmed her intention to raise key interest rates twice during the month.
The only potential good news on the buyers’ docket: The erosion rate should also be revised upwards in the coming weeks – after Percy also announced that it is ready to revise the calculation method – which could bring a bit more flexibility in terms of getting mortgages – however, assuming his revision is larger. From the increase that can be experienced in parallel borrowing rates!