the real reasons for an unprecedented crisis – L’Express

On July 20, 2022, real estate professionals flinched. In front of her desk bearing the logo of the European Central Bank (ECB), Christine Lagarde did not procrastinate during her highly anticipated post-governors’ meeting press conference, organized from Frankfurt. As soon as the audience had greeted the audience, the president of the monetary institution immediately announced the increase in the ECB’s three key rates by 50 basis points – a first in ten years – in order to fight against galloping inflation at the time. A tight but necessary strategic shift. Nine other increases will follow in the space of fifteen months.

After years of intoxication, the stone market suddenly got into trouble. Borrowing from the ECB, the banks were forced, in turn, to put pressure on potential buyers. Real estate interest rates, which hovered around 1% between 2021 and 2022, jumped the following year, reaching up to 4.30% in certain establishments last October. “Until now, the money was almost free,” recalls Yann Jéhanno, president of the Laforêt agency network. With immediate consequences. “This tightening of the screw has seriously slowed down the acquisition capacity of a certain number of people, in particular first-time buyers, who have not been able to build up a personal contribution or have not had the chance to obtain a family loan or a donation”, explains Me Edouard Grimond, spokesperson for the Superior Council of Notaries.

In the space of a year, the volume of real estate loans granted fell by 40%. The phenomenon is not only concentrated in large cities, it affects the entire territory. Only vacation spots, where second homes make up the majority of the housing stock, are still holding their heads above water. “But the myth of the Parisian who arrives with his pockets bulging with gold coins has lived,” assures Guillaume Martinaud, president of the Orpi cooperative.

For professionals in the sector, the blow is tough. Everyone carefully avoids talking about a real estate crisis, preferring to talk about a housing crisis. “The French always want to become owners,” assures Yann Jéhanno. Guillaume Martinaud agrees: “The crisis is not a sign of disinterest on their part. We are struck by the number of offers accepted… and by the number of compromises which are difficult to achieve afterwards”. In the hope of making the market more fluid, most players are campaigning for the relaxation of the rules for granting real estate loans decreed in 2019 by the High Financial Stability Council (HCSF).

This organization sets the maximum debt rate authorized for households at 35% and limits the duration of loans to twenty-five years. However, it allows banks to deviate from it, in 20% of cases. “No one can believe that the HCSF rules still make sense in 2023. They are outdated,” assures Bérengère Dubus, general secretary of the Union of Credit Intermediaries, who wishes to “return to the free choice of banks”, while authorizing credit terms greater than twenty-five years for those under 30. “These criteria were thought of at a time when the market was booming to, rightly, calm it down. But they come into force in a counter-cyclical manner,” adds Yann Jéhanno, from Laforêt.

False problem, we retort at the Bank of France, whose governor, François Villeroy de Galhau, is particularly inflexible in the face of a possible relaxation which could revive inflation. “It is very surprising to have this fixation on the HCSF. There has been very little communication on its essential role which is to prevent systemic risks. The rules laid down are sound and making them more lax would expose households to over-indebtedness “, supports economist Hélène Rey, member of the HCSF.

This organization also affirms that banking establishments do not exploit “100%” the possibilities offered to them to deviate from the rules. And while everyone is passing the buck, households who believe they are solvent are submitting loan applications… without knowing whether or not the bank has already reached its exemption quotas. “The government says that it is aware of the crisis, but that the governor of the Bank of France is independent. We are replaying the same scene as with the usury rate,” laments Bérangère Dubus. Michel Mouillart, head of the Crédit Logement-CSA Observatory, points out another blockage: the personal contribution required to obtain a loan. “Since 2019, it has increased by 50%, recalls the economist. There are not many households who have been able to increase their saving capacity by that much.”

For buyers who are lucky enough to obtain a loan, the situation has also changed. “They obtain, most of the time, less credit than expected and consequently turn to territories where prices are a little lower”, the only way to maintain the desired surface area, continues Michel Mouillart. If they persist in their initial geographical choice, the deadweight loss in square meters is severe: for an average loan, between 200,000 and 300,000 euros, the increase in rates observed over one year is equivalent to 20% less surface area. “What buyers put in the price yesterday, they put in the interest charge: this disrupts the market a lot,” adds Philippe de Ligniville, deputy general director of Bien’ici, an online real estate advertisement platform. . Not to mention that in 2023, salaries have, on average, increased little, pushing certain households to make trade-offs and postpone their projects.

In this tunnel of bad news, there are nevertheless some glimmers of hope on the horizon. “The Banque de France anticipates that nominal wages will increase faster than consumer prices in the next two years, which will help to restore real estate purchasing power,” specifies Agnès Bénassy-Quéré, deputy governor. of the Bank of France. Another clarification, the extension until 2027 of the zero-rate loan, to which six million people are now eligible. Next year, 40,000 buyers could benefit. Always a good thing for the sector, which is now awaiting a reduction in interest rates from the ECB. But here again, patience is required. It should not take place before next summer. As soon as possible…