PARIS Q-3 2023 Market Update
The 3rd quarter report for 2023 from the Chambre des Notaires de Paris has just been released and holds some very interesting data points. Laroche Groupe Paris Properties invites you to dive into our comprehensive analysis below.
Sales Units
The number of closed transactions 12-months-running in Paris dipped -16% compared to the year prior, adjusting from 41,250 to 34,480 units. The number of closed transactions during the 3rd quarter in Paris was 7,910, down -29% from the year prior and -14% below the 10-year historical average.
Inflationary forces impacting the cost of living and the Central European Bank’s efforts to tame inflation by dramatically raising interest rates, decreasing buying power at the same time, are the primary drivers of this drop in activity in the market. The average home has become 18% more expensive for the average buyer as a result.
Impact On Affordability
When we look at the impact on the average monthly payment that the rise in mortgage rates has created, a person who buys an average 65 square meter (700 square feet) apartment in Paris today will be paying 2,398 €, 18% more than they would be paying had they bought the same apartment in January of 2022 when interest rates for home loans were roughly four times less than what they are today.
The good news here is that rates have already started to come down from their high in September, and the first of a possible series of rate cuts are being discussed at the Central European Bank for as early as March of 2024.
Another way of looking at the same shrinking affordability equation is to track how much living space the average home-buyer can buy with the same budget over time.
What you see in the graph above is that an apartment buyer in Paris who could have afforded 65 square meters in January of 2022 can now afford 55 square meters when keeping their monthly payment the same. That’s a decrease of -15.3%.
Sales Price Evolution By Arrondissement
So what is this decrease in affordability doing to pricing? As we can see, prices have adjusted downwards in every arrondissement in the city. The degree to which prices have adjusted is not uniform, however, as the central arrondissements of the 1st through the 6th and the 8th have lost between -2% and -2.5% in value whereas the peripheral arrondissements have lost between -4.4% and -6.7%.
Price Per Square Meter By Arrondissement
When looking at pricing through the lens of price-per-square-meter, what is interesting to note is that 9 of the 20 arrondissements are now below the symbolic 10,000 € per square meter threshold and only the first 7 arrondissements continue to hold value above 12,000 € on average per square meter. The 6th arrondissement, as usual, holding it’s place as the premier destination arrondissement with an average price per square meter of above 14,000 €.
Where do the Notaires see the market heading? Based on the information captured from the “pre-contracts” or “compromis de vente”, prices are set to continue their adjustment downward to attempt to bridge the affordability gap buyers are currently facing. As soon as next month, the Paris real estate market as a whole could see the average price per square meter drop below the 10,000 € mark.
Inflation in France dropped to 3.4% in November from 4.0% in October. While this is welcome news, the cost of living is not getting less expensive, it is just getting more expensive more slowly. The only 2 other factors that can adjust in order for the market to find balance are price and the cost of money. 2024 will most likely see both come into play.
Read the entire report (in FRENCH) here
À bientôt !
Aaron
Laroche Groupe Paris Properties
