An average 3% year-on-year drop in French property prices has been confirmed in new notaire figures, with sellers advised to accept a negotiation downwards if they need to move.
The fall is expected to continue for at least another six months.
Large cities, especially Paris, are most affected and rural areas the least.
Prices are dropping the fastest in areas where they had increased most in recent years, and more slowly in areas where they stayed more moderate, said the president of the large estate agents’ federation Fnaim, Loïc Cantin.
Read more: Seven key trends in new French property market data
‘Sellers need to adapt to market realities’
The fall is mainly due to the rise in mortgage rates from less than 2% in 2022 to over 4%.
Rates are affected by the Central European Bank, which has sought to reduce inflation by raising ‘key interest rates’ to 4%.
“It’s happened progressively,” said Mr Cantin.
“A year ago rates were rising but there had not been a price impact.
“Now, we see a very noticeable lowering month-on-month. It takes time for sellers to adapt to market realities.
“Over the next six months, no doubt, this tendency will continue, since sale prices are still not proportional to people’s purchasing power.”
Annual sales of non new-build homes are likely to be below 900,000, a drop of 300,000 year-on-year.
But where people are able to buy, they are negotiating. “They don’t hesitate to offer 10 or 15% off.” Sellers who need to sell, must listen, he said.
Read more: Number of building permits issued in France continues to fall
The picture is not uniform across the country
The latest report by the French notaires states that average non new-build prices saw a slight year-on-year drop by August, which reached 3% in November, slightly more in houses than for flats.
In Paris the figure as of November was 6.1%.
Many cities showed the steepest drops but the picture is not uniform. Flat prices barely changed in Lille, Marseille and Rouen but dropped 8% at least in Besançon, Nantes, Angers and Rouen.
Sales volumes in non new-build houses dropped at least 8% in Amiens, Orléans, Nîmes, Saint-Etienne, Valence, Lyon and Toulon and 3-6% in Le Havre, Rennes, La Rochelle, Toulouse, Le Mans, Grenoble and Lille.
Price comparison site Meilleurs Agents states in its November ‘barometer’ that, month-on-month, cities saw drops apart from Lille, Montpellier and Toulouse.
Nantes saw the biggest fall (-0.8%), followed by Marseille and Lyon (-0.5%).
However rural areas had a 0% change month-on-month and show a 2.2% rise on November 2022.
Mr Cantin said: “Marseille has not seen steep rises, whereas Nantes has increased a lot so the correction is more severe.
“In Nice, prices are more stable. Over half the population is 65+; they already own property and have capital and have less need of loans or to negotiate.”
Read more: From +12% to -9.8%: how French property prices have changed in year
‘Remember, if you sell for less, you buy for less’
The government and ECB say there will be no more interest rate hikes for now. However, fluctuations linked to world events are always possible, and if inflation rises, the rates could rise again to compensate.
The CEO of the ERA Immobilier network in France, Eric Allouche, said the drops are moderate compared to the slump in sales but the latter is not a “catastrophe”.
“We only went over one million sales in 2019,” he said.
It is possible, however, that by the end of the year the average annual price drop in non new-build will up to 6%, he said, adding: “But remember that if you sell for less, it also means you can buy for less.”
Five factors affecting price drops
Mr Allouche said there are multiple factors affecting price drops.
Firstly, the type of property; for example studio flats are selling better than big houses and so are dropping less.
Location is the next factor. “If you’re in a sought-after coastal resort the prices will drop much less.”
The third factor is the condition and diagnostic study ratings. Some people are selling homes as they do not want to have to renovate under new environmental rules, he said.
A further factor keeping prices dropping too much is a lack of new-build due to the high price of raw materials and fewer buy-to-let tax breaks.
Some sellers are refusing to lower their prices or taking their property off the market is another, he said.
“Historically, buying property is always a safe investment in the long-term,” he added. “Just don’t buy and resell straight away.”
Year-on-year changes in France in November (non new-build homes)
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Property prices overall: -3%
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House prices overall: -3.2%
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Flat prices overall: -2.7%
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Property prices overall in France outside Ile-de-France: -1.9%
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Flat prices outside Ile-de-France: -0.3%
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House prices outside Ile-de-France: -2.7%
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Flat prices: 0%: Marseille, Lille, Toulon
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Flat prices -8%+: Besançon, Mulhouse, Nantes, Angers, Rouen
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Volume of house sales: -8%+: Saint-Etienne, Amiens, Orléans, Nîmes, Valence, Lyon, Toulon
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