As we mentioned at the beginning of 2023, many factors are affecting the housing sector. As feared, the crisis is beginning to make itself felt and many voices are being heard. In the last two weeks, no less than the CEO of the Nexity real estate group, Valérie Bédague, and the president of Medef, France's largest employers' organisation, Geoffroy Roux de Bézieux, have sounded the alarm.

What is happening in the property market?

The triggering factor is the massive inflation that started last year and is still going on. This has had two major consequences. Firstly, central bank interest rates have risen sharply, which has had a major impact on borrowing rates. This increase has led to a drop of about 20% in the purchasing power of buyers. Combined with the financing rules laid down by the High Council for Financial Stability, the number of loans granted between February 2022 and February 2023 fell by 40%! The second consequence is the rise in the cost of materials which constrains projects involving work or those involving construction.

What are the concrete consequences?

The ripple effect is twofold here too. On the one hand, we see that the part of the population which, usually, when buying its first home, leaves the rental stock, stays there. On the other hand, the modification of real estate tax solutions and especially the strict prudential rules have penalised rental investments. Therefore, instead of the 500,000 new and renovated homes that should be added to the housing stock each year to meet the needs, only 375,000 new homes were built in 2022. Industry professionals expect an even lower figure for 2023.

This situation is causing an unprecedented saturation of the rental market. We are seeing a change in tenant behaviour, particularly among students. Whereas before, they did not hesitate to give up their accommodation during the summer, today they prefer to keep it so as not to take the risk of not finding an accommodation at the beginning of the school year.

How can this problem be tackled?

As mentioned, the cause of the current crisis is multifactorial. Several solutions could be put in place by using the banking lever via credit or through tax reform. It is necessary to help individual investors to finance the necessary housing and to encourage private landlords to maintain or even increase their rental assets.

This particular situation will lead to changes in the market. In this context, it is important to seek professional advice. The Wealth A7 team can help and advise you, contact us!

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