“Landing”, “reversal”, “tilting”… There is no shortage of qualifiers to characterize the year 2022 in the real estate sector. While prices increased markedly during the first part of the year, they began to stagnate and even fall in certain territories during the second part of the year. Interest rates for mortgages have been rising steadily since February, before usury rates followed this trend from the summer.
- Price: a market for the old in two stages
The prices of old real estate began to slow in 2022, according to the latest professional barometers. “Everyone knows that the market turned around in the summer,” Charles Marinakis, president of Century 21 France, told AFP. Over the whole of 2022, the average price per square meter rose to record levels, according to annual data from this agency network. But these figures hide a break in the middle of the year, when prices began to fall.
Other professionals observe similar trends. In his annual market update, Laforêt, who evokes “a return to equilibrium after the euphoria”, notes “an old real estate market in two stages” in 2022: “a first period, from January to July , marked by a strong acceleration with extremely sustained demand; then the appearance of the first signs of a slowdown, especially in large cities and rural environments”. In total, the increase in prices is 4.7% at the national level over the whole of the year, records Laforêt.
Laforêt also insists on the “rebalancing” of prices which has been observed “in recent months”. “The big cities, as well as the most expensive departments and districts have seen, for the first time, their prices decline after years of rising”, notes this network of real estate agencies. “On the other hand, the coastal areas are maintaining high prices due to the strong enthusiasm of the French for these territories, while the rural areas and low-density municipalities are reaching a glass ceiling”, continues Laforêt.
In several cities, prices, which have become very high, have thus fallen, such as in Paris, Lyon or Bordeaux, where buyers can no longer follow. “All the major cities, with the exception of Marseille, are in the price landing or decline phase and there is no reason for this trend to stop in the months to come”, already noted in last November with L’Express Yann Jéhanno, president of the Laforêt network.
Orpi, for its part, estimates a price increase of 6% at the national level over the year 2022. But the leading French network has recorded “a slight slowdown in the rise in prices, in particular since September, which acts directly compromises”. According to Meilleurs Agents, prices per square meter increased by 3.6% between January and June 2022, but only by 1% between July and December. The first cause is the significant rise in mortgage interest rates since the spring of 2022 and French regulations on the usury rate, which have reduced access to credit.
- Interest rates: a significant increase since the spring
The average interest rate for real estate loans in France (all durations combined) thus stood at 2.25% in November, a highest for at least seven years, according to the dashboard of the Crédit Logement/ THAT’S IT. In November 2021, the average interest rate was 1.06%. For its part, the broker Meilleurtaux notes that “nominal mortgage rates are currently around 2.50% and could reach 3% in the first quarter of 2023”.
The marked rise in interest rates is explained by the fact that the banks are passing on the tightening of the monetary policy of the European Central Bank (ECB), via an increase in its key rate, in order to combat inflation. “In 2022, given the general inflation and the conflict in Ukraine, the rates have started to rise again, specifically since March, making access to property more difficult”, notes Meilleurtaux in its annual report on the power of real estate purchase in the 20 largest cities in France. The broker distinguishes the first half, where “the production of real estate loans was strong”, with the “clear slowdown felt since this summer”.
In its regional rate letter published last December, the broker Empruntis also recalls that property rates “continue their increase which began in February, in all regions of France”. “The deterioration of borrowing conditions was rapid, and even if rates remain low, this new increase is not without consequences for borrowers”, observes Cécile Roquelaure, director of studies at Empruntis.
Laforêt notes “a worrying phenomenon”: the fact “that some of the potential buyers are self-censoring”. “Faced with the double rise in prices and interest rates combined with the fear of not being able to borrow, some are giving up, in particular first-time buyers and the most modest households hit hard by inflation”, points the finger. this network of agencies. “First-time buyers now represent only 32% of buyers, where they were more than 50% previously, having more difficulty accessing credit, underlines Laforêt. Second-time buyers are therefore the most active (49%). After having sold their property, they have the necessary cash to buy a new one.”
Nevertheless, according to the Banque de France, “the year 2022 was again a favorable year for mortgages”, the institution noting a growth rate of mortgage loans to households of 5.7% in the first estimate. “The interest rate conditions remained the most attractive and safest of the major countries in the euro zone”, assures the Banque de France.
- Wear rate: a steady increase since the summer
The maximum legal mortgage rate, also known as the usury rate, increased on January 1, 2023 from 3.05% to 3.57% for a loan of 20 years and more, according to the notice published on December 28. 2022 in the Official Journal. During the previous increase, on October 1, 2022, this attrition rate had gone from 2.57% to 3.05% for fixed rate loans of 20 years and over, while on July 1, 2022, the new usury rate increased from 2.40% to 2.57% for loans of 20 years and over.
Intended to protect individuals from abusive borrowing conditions, this rate caps all the costs of a home loan: credit rate charged by the bank, any brokers’ commission, borrower insurance. The rate is calculated each quarter by the Banque de France, which takes into account the average rates charged by banks over the last three months, increased by one third. There are as many wear rates as there are types of credits.
The cap rates came under fire from critics last summer, particularly from brokers who saw them as a barrier to access to mortgages. One of their unions had even gone so far as to demonstrate on September 20 in front of the headquarters of the Banque de France in Paris in order to ask the central bank to make a gesture.
During the increase of October 1, 2022, the Banque de France had considered “neither desirable nor necessary […] an exceptional increase” in ceiling rates, whose role “is to protect borrowers”. Raising the rate of wear and tear has the effect… of making new mortgages more expensive for individuals.