Historic decline in the purchasing power of real estate in most major cities - Economy Matin

Historic decline in the purchasing power of real estate in most major cities – Economy Matin

When the government introduces the Real Estate Purchasing Power Law, Vousfinancer, a network of 200 credit intermediary agencies, wanted to assess the loss of real estate purchasing power since the beginning of the year in 25 major cities in France. Unsurprisingly, in the context of rising credit rates, with prices continuing to rise in most cities, the surface area that can be purchased by paying €1,000 per month over 20 years, with 10% lower inputs everywhere since the beginning of the year (until 15 square meters in 6 months). For 5 years, the loss of purchasing power of real estate up to 20 square meters in 10 cities exceeded, although credit rates in 2017 were higher than today …

The purchasing power of real estate has declined everywhere in just 6 months, due to the sharp rise in interest rates and the continued rise in prices

Since the beginning of the year, credit rates have increased by an average of 0.55% over a 20-year period, rising from 1.10% to 1.65%. Thus, the borrowing capacity of 1,000 euros of repayment per month for 20 years has decreased by more than 10,000 euros, From 215,346 euros to 204,301 euros, Mechanically, all other things being equal, it leads to a decrease in the purchasing power of the borrowers, unless they increase their personal contribution to compensate for the decrease in the amount borrowed.

In addition, real estate price inflation continued since the beginning of the year in most of the cities studied, further penalizing potential buyers. If cities such as Reims, Lille, Villeurbanne or Lyon experience a lull with price changes of less than 1%, and even a decrease in Nantes (-0.7%) or Paris (-0.1%), Three quarters of cities still experience price increases of more than 10% in Le Mans or Brest.

Thus, in just 6 months, under the combined effect of rates and pricesThe purchasing power loss (for €1,000 per month over 20 years with a 10% contribution) amounts to 19 sq m in Le Mans – roughly the equivalent of two bedrooms – 15.5 sq m in Saint-Etienne, 14 and 9 sq m in Brest and 10.5. square meters in Nîmes. Recoil between 6 and 8 m2 in Grenoble, Strasbourg, Le Havre, Clermont-Ferrand, Toulon, Dijon and Angers, reaching more than 5 meters globally2 In 15 of 25 cities!

The period is complicated for buyers because credit rates have risen sharply since the beginning of the year, while overall prices have not fallen, on the contrary. Thus, the price increases have not – yet – been offset by price reductions, and in and of themselves, there is no guarantee that this will be the case in the coming months, because some cities retain a strong oomph that fuels this real estate inflation. As a result, the personal contribution necessary for the purchase increases, to compensate for the loss of borrowing power of 10,000 euros on average, and to finance the notary fees that mechanically increase with prices.but above all simply to buy enough space to live in…

In 5 years, up to 50 square meters of lost purchasing power, the equivalent of a large two-room apartment!

Vousfinancer is also concerned with the evolution of the purchasing power of real estate over a 5-year period, over a five-year period. “The evolution of the real estate market over 5 years is interesting, because in 2017, mortgage rates were 0.10 points higher than their current level – and medium-sized cities have not yet had the allure it has since Covid. The impact that the dynamics of the real estate market in recent years has had on the purchasing power of real estate can be discerned. Sandrine Alonier analysis.

And while credit rates have risen sharply since the beginning of the year, these increases come after several years of decline. And so they’re almost back to their level in 2017, when we borrowed an average of 1.75% over 20 years over the summer. Over 5 years, prices decreased by 0.10 points with an increase in borrowing capacity of €2,000 versus €1,000 monthly payment over 20 years. But this “increase” did not save square meters, quite the contrary!

Within 5 years, in all 25 cities studied, purchasing power decreased, from a minimum of 3 square meters in Paris to as much as 50.6 square meters in Brest. In 21 of the 25 cities, the surface area loss is more than 10 m2, the equivalent of a bedroom, and even exceeds 20 m2 in Clermont-Ferrand, Toulouse, Reims, Strasbourg, Le Havre, Le Mans, Saint-Etienne, Angers and thus Brest .

Therefore, the decline is greatest in Brest (-50.6 m 2) Angers (-42.5 m 2) and Saint-Etienne (-40.9 m 2), with the area equivalent to 2 plots lost in 5 years.

The main explanation: In 5 years, prices in some cities of France have increased by more than 40%. This is the case in Lyon (40.9%), Toulouse (40.4%, Strasbourg (47.1%), Rennes (56.8%), with registrations arriving in Brest (+57.4%) and Angers (68.6%), the city with the greatest drop in strength Relatively purchasing (-40% in 5 years).

The conclusion is clear: “The purchasing power of real estate has declined in all cities in France over the past five years. The very low level of prices has facilitated access to real estate, the health crisis has changed the desires of the French and developed the attractiveness of these cities, with today the other side of the coin: the loss of the ability to buy more than 40 meters square in certain cities. Even if interest rates rise and prices stabilize, as has already been the case since the beginning of the year in certain cities, most of the rise in the past five years will almost certainly not be erased, and access to property will be complicated in the coming months for low-income families, but not only ! » Julie Baschett, general manager of Vousfinancer concludes.

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