Their estate agent advised them "not to be stubborn and to lower the price." The couple, who live in the 19th arrondissement of Paris, followed the recommendation without a second thought: Their four-room apartment, put up for sale in April at €695,000, is now listed at €640,000. Despite this "effort," it still hasn't found a buyer.
In the meantime, they have bought another, more expensive home, taking out a "bridging purchase" loan. "We're not strapped for cash, but we've lowered our asking price considerably. We're now asking €7,600 per square meter, so we're already cutting into our budget," explained Nathalie (first name changed). "Not to mention that we're paying utilities and property tax for both apartments. It's really stressful."
The years of overheating in the French real estate market, driven by historically low interest rates and a post-Covid buying frenzy, have been followed by a period of paralysis. Since peaking in August 2021 at over 1.2 million acquisitions over a rolling year (between August 2020 and August 2021), volumes have collapsed. "By the end of 2023, we should see between 900,000 and 950,000 transactions in a single year," predicted Frédéric Violeau, a notary in Caen and head of national real estate statistics at the Conseil Supérieur du Notariat. With 300,000 fewer transactions per year, the market would have contracted by a quarter.
The tipping point? The end of the free-money cycle. The historic fall in interest rates since the mid-2010s had had the widespread effect of making customers solvent, and fueled a considerable rise in prices. To curb inflation, which has been an issue in Europe and around the world since the outbreak of war in Ukraine at the end of February 2022, central banks have sharply raised interest rates.
Banks have passed on these increases. The average rate on mortgages has increased almost fourfold, from just over 1% in December 2021 to 3.8% in August 2023. This is enough to significantly reduce the purchasing power of households, who have largely given up on embarking on a real estate project, as evidenced by the 45% fall in one year in the number of home loans to individuals.
Faced with increasingly scarce buyers, sellers no longer have the upper hand. "When we bought our apartment in 2013, a small three-room flat in the 10th arrondissement of Paris, we had to rush to get it. The important thing was that it was 80% right for us. Nowadays, buyers are very fussy about everything. They make counter-inspections and then end up not buying," said Vincent (first name changed), who moved to the south of France. He ended up selling his 55 m2 apartment a year after entrusting it to a real estate agency. The apartment sold for €615,000, well below the initial price of €670,000.
You have 71.29% of this article left to read. The rest is for subscribers only.