Reservations and sales at half mast ... the new real estate market is stuck

Reservations and sales at half mast … the new real estate market is stuck

Prices continue to rise in new housing but sales are weakening significantly, while families are finding it increasingly difficult to borrow.

The new real estate market is shrinking. Thus, the marketing of new housing in France decreased in the second quarter compared to 2021 and is still below the pre-pandemic level, according to figures published on Wednesday by the Ministry of Environmental Transformation.

In the second quarter, 27,909 new homes were booked for individuals. This is 13% less than in 2021, the year of “catching up” after the 2020 restrictions, the ministry notes, and much lower (-20.4%) than it was in 2019, the last year before the pandemic.

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Over a longer period, new home listings and reservations have gradually declined since their last peak in 2016. However, they have remained at a level above the level observed on average over the period 2007 to 2015 (see chart below).

The number of homes offered on the market also decreased by 11.7% in one year, with 28,733 new sales. The decline is most pronounced in single-family homes, but these account for less than a tenth of sales and bookings.

High costs and high prices

Average booked sales prices continued to rise, at 4.9% for apartments and 5.2% for family homes. For apartments, the new square meter is now trading at 4,621 euros. With demand remaining strong and prices of materials (+18% between January and April, according to the latest result from the Federation of Crafts and Small Businesses, or Capeb) and energy that have risen sharply over the past year, prices continue to rise. A phenomenon reinforced by pressure on the land (against the goal of reducing soil industrialization) and new environmental standards for new buildings (RE2020 in force since January 1, 2022), which again weighs on costs.

The downtrend in sales can be seen especially in tight areas, namely Ile-de-France, Cote d’Azur and the Swiss border. Only the least stressed areas, except for municipalities with a population of over 50,000, see an increase in supply, but at very low volumes, the market is concentrated in tense areas and large agglomerations.

The ministry notes that a total of 13.5% of bookings ended with buyers canceling, an increase of 2.1 points compared to the same period in 2021, while the rapid rise in interest rates caused disruption to access to credit.

In July, the average rate for all periods combined was 1.68%, according to the Crédit Logement CSA observatory, versus 1.52% in June. In detail, the 15-year rate stands at 1.57%, the 20-year rate is at 1.69% and the 25-year rate is at 1.79%. With the usury rate barely budging on July 1, more and more families are unable to borrow. According to brokers, 40% of files that go through these brokers today are rejected due to the rate of wear.

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