Property in France: Buying power up slightly amid falling prices

Now could be a good time for property buyers in France to secure a bargain as purchasing power for buyers is rising while the property market remains in a slump, figures suggest.

Purchasing power for buyers in larger towns is on the rise for the first-time in four years, figures from a new study by mortgage brokerage Meilleurtaux show.

The study shows that on average, buyers in France have gained 3m² extra in purchasing power in 20 of the largest towns in France.

Saint-Etienne (Loire, Auvergne-Rhône-Alpes) tops the table when it comes to buying power, the figures suggest. 

For instance, the study reveals that a buyer with a 3.7% loan and a borrowing capacity of €169,408 can now buy a 123m² home in this town, up from 118m² in December 2023 - an increase of 5m².

For the same amount of money (at the same interest rate), buyers have also gained 4m² in Strasbourg, Toulouse, Lille, Reims, Dijon, and Le Havre.

The towns with the lowest increase are Paris, Nice, and Toulouse, where it is just 1m².

"Even though these developments are still modest, it's a very positive sign for the market," said Maël Bernier, spokesperson for Meilleurtaux.

Falling interest rates and property prices

The main driver of this improvement in purchasing power is slightly falling interest rates over the past year. The average mortgage rate fell from 4.2% in December to 3.7% in May, show figures from the Observatoire crédit logement/CSA.

It also comes as the property market has been in a significant slump, with prices falling by 3.8% nationwide (down 4.1% for flats, and 3.5% for houses) in one year, said the Fédération nationale de l'immobilier (Fnaim). This is the sharpest fall for 15 years.

Read more: France’s property market sees greatest fall in sales for 50 years

Some cities - including Nantes, and Lyon - had even more dramatic falls in property prices between May 2023 and June 2024, said Ms Bernier (of 11.2% and 9.1% respectively). 

"The downturn in the property market has led to falls in prices per m², particularly in the major cities," she said.

Similarly, the slump has affected estate agencies, with 1,100 being forced to close their doors over the past year.

Fnaim president Loïc Cantin has said that he expects the number of closing agencies to exceed that seen during the height of the economic crisis in July 2009 when 1,385 closed in the previous 12 months.

The surprise legislative elections have also been blamed for causing even more of a property downturn, estate agents have said.

“Political instability can lead to a credit crisis and a financial crisis in our country, so this is an indicator that we will be keeping a particularly close eye on,” said Mr Cantin.

Read also: Hundreds of estate agents close in France as property sales plummet 
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Purchasing power still relatively low

But while this rise in purchasing power has been seen as encouraging news in comparison to rates over the past 12 months, the power is still relatively low, as borrowing capacity has been dropping steadily for years.

"If we compare [now] with the end of 2021, some towns and cities have lost up to 35m², or the equivalent of two habitable rooms,” said Ms Bernier. “Examples include Nîmes (a drop of 35m²), Toulon (34m²), and Le Mans (34m²).

“Over the same period, there has also been a very significant fall in purchasing power in Saint-Etienne (a drop of 27m²), Grenoble (21m²), Le Havre (25m²), Dijon (19m²) and Marseille (19m²),” she said.

The Fnaim has said that it expects prices to continue falling, with an overall drop of 5-7% over the course of 2024.

Interest rates are also expected to hover at around 3.5% for the rest of the year, although the forthcoming legislative elections could yet destabilise this, experts have warned.