After eight years of exponential price increases, real estate is experiencing a shock. The Notaires-Insee index observes this quarter a drop of 0.2% compared to the fourth quarter of 2022 on the prices of the old – that is to say any housing that is not new. Although it still notes a 2.7% increase in prices over one year, the deceleration is very clear compared to the end of 2022, when the increase reached 4.6%.
“We have already seen a drop in real estate prices for a good year. It has increased over the past three months,” confirms Olivier Princivalle, president of the Greater Paris unit of the National Real Estate Federation (Fnaim) . For the specialist, a double conjuncture is responsible for this fall in prices in a context of inflation.
Interest rates and thermal strainers
First, “the difficulty of access to borrowing for households, due to the sharp increase in interest rates coupled with the drop in the number of credit allocations: today, only one out of two files is eligible”, explains the professional. However, if there is less demand, the supply drops. The number of transactions has also decreased this year: there were 1.07 million in the first quarter of 2023, compared to 1.12 million at the end of 2022.
Another culprit: environmental regulations around the energy label, which is beginning to produce its effects. “The price of goods with a bad label is falling, because buyers know that a lot of work will be needed on these energy-intensive homes,” explains Olivier Princivalle. The impact is all the stronger since this label goes hand in hand with a gradual ban on the rental of “thermal strainers” – these dwellings particularly poorly rated on the energy scale – applied since January 1, 2023 but which should go on to become more severe. until 2028. “Now that we have put the eye of individuals on the green value of housing, they are more and more vigilant where they set foot” continues the president of the Fnaim, “especially when they plan to rent their property in the future”.
A notable drop in the Paris region
The phenomenon seems to be even more exacerbated in the Paris region, where prices are now in the red over one year, falling by 0.6%. In Paris, the drop reached -2% in most arrondissements, except in the centre, the 6th and 7th arrondissements. According to AFP, the Notaries of Greater Paris predict that the annual drop in prices should increase in the second quarter, approaching in Ile-de-France 5% for apartments and 3% for houses. In the Paris region, the share of housing classified G, the worst label on the energy scale, tripled in transactions between 2021 and 2022 for apartments (2.7 to 7.9%) and doubled for houses (3 ,6 to 8.5%), according to data from notaries.
For Olivier Princevalle, if these criteria “suggest that the decline will accelerate and could last over time”, “we must keep in mind that the real estate value appreciates over the long term, and historically it has always returned to a level higher than what it was before”, hence its title of safe haven. Several factors could now make the market more fluid. “For example, the slowing down of the timetable for energy renovation, or even the facilitation of access to borrowing by banks, which could be encouraged by the State”, proposes the expert, recalling that communities take part important part of their resources from taxes on real estate transactions.