(This article was published on Friday January 19, 2024 at 8:36 am and updated at 10:48 am)Two figures mark the real estate year 2023: a 20% decrease in transactions, about 900,000, i.e. the level of 2016, and a 40% decrease in the production of real estate loans, 132 billion euros (excluding renegotiations), according to preliminary estimates. A gap that may seem surprising, but can be explained by the profound transformation of the market over the past two years against the backdrop of a rapid rise in interest rates.
“ The market has moved towards categories that are less expensive, less well positioned and require less credit, all things being equal. Especially since personal contribution requirements have also resulted in less recourse to borrow for a much larger segment of consumers.” Michel Moulart, professor of economics and scientific adviser to the Credit Logement/CSA Observatory, explains.
“We are in a more uneven real estate transaction market”, summarizes Pierre Chapin, co-founder of online broker Prato, who also notes a doubling of cash purchases from one year to the next. For Michel Moulart, the rise in rates – an average of 4.20% (without insurance) in the fourth quarter, according to the Credit Lodging/CSA Observatory – does not explain everything: the recommendations of the High Financial Stability Council (HCSF), which significantly impose a maximum attempted rate of 35%, on average Also contributed to the 45% growth since 2019 in individual contributions. “Rise a dizzy!”, Also notes Professor Emeritus.
A mirage of falling prices
Clients and projects were indeed completely disrupted. Households that made transactions saw their income rise by more than 8% in 2023. Unprecedented. An increase in individual contributions excludes a portion of the least advantaged households from the market. Finally, households that can no longer carry out their projects in big cities have moved to space, everywhere where prices are the lowest.
“It’s not the prices that have dropped, it’s not the same price! », recalls Michel Moulart. Indeed, it is difficult to compare prices in Paris – a city that represents only 3% of the market – with an average of 1,400 euros per square meter in a provincial city. So an average real estate loan reduction of 8% in 2023 or a 13% reduction for loans guaranteed by credit lodgement (up to 227,000 euros).
Which brings us back to the eternal question of these price cuts that will not come and result in market stagnation. In the real estate market, the rule is well known: market adjustment occurs first on volume and adjustment by prices occurs much later. However, according to economist Ellen Turdjman, director of studies and foresight at BPCE, “Adjusting for inflation for two years, real home prices have returned to their levels before the 2008 financial crisis.”
Pierre Chapin, for his part, is banking on a simultaneous decline in nominal prices, on the order of 10% — and interest rates, on the order of 100 to 150 basis points — to rebalance the market in 2024.. “The reduction in rates will limit price cuts this year which will make consumers more solvent.” Promotes the founder of the online broker. Currently, Pratto estimates the discount on the negotiated price on transactions at 8%, but is not yet reflected in data published by notaries.
“The revision of the project by the borrowers, their amount, their location, the surface area, already equates to a significant reduction in price”,
Credit Professional Estimate. “In the regions, it will not be through falling prices that the market will reactivate, but by improving the ability of households to access credit”Michel Mouillart says.Market stabilization
And this market is starting to move. “The Beginning of the Beginning”, The scientific advisor estimates, noting that in 2023, the end of the year is completely different from the beginning of the year. According to the Observatory’s figures, the number of loans fell by 46% in the first half of 2023, which finally stabilized at a 19.5% decline in the fourth quarter. “This does not mean that a rebound is within reach, but the coming months will likely be a stabilization of activity”Underlines Michel Moulart.
“Today, credit supply has fully recovered and all banks are moving in the market to find customers, especially the commercial banks that also drive the market. And on the demand side, we see tremors and we believe the market will find its new equilibrium in the second half of 2024.”Analyzes Pierre Chapin.
Banks have in fact managed to restore their margins, especially thanks to an increase in interest rates (on loans of 20 years and above) of more than 300 basis points in 2023, even though the average rate of credit (excluding insurance) increased by only 190 basis points. But on some files, worst of all, we saw credits of more than 5%!
An average rate of 3.25% at the end of 2024
HAS In mid-January, the average rate for real estate loans was 4.23%, according to the Housing Credit Observatory/CSA. Suffice it to say that the average rate has been stable for three months. Which is logical given that the European Central Bank hasn’t raised its key rates since September and that’s it “possible”According to ECB president Christine Lagarde, she is starting to reduce them “In the summer”.
Most brokers claim that the deterioration in supply is definitely behind us, so the market may start to float above water if demand slowly returns. Households don’t really expect a clear rate cut (or price drop), and no one expects a strong economic recovery. But we should not expect miracles on every side either.
According to the Observatory, the average rate should be 4.20% in the first quarter of 2024, the same level as in the fourth quarter, with a very gradual decrease in rates during the year, ending at 3.25% in the fourth quarter. That’s an increase of about 100 basis points.
“This reduction movement should continue in 2025 but more slowly,” Expecting Michel Moulart. Enough to breathe new life into household solvency. “But it won’t be a big rebound,” warns the economist. So we should forget 2021, its record production and average rate of 1%… which we certainly won’t see again for decades.