An economic context favorable to the residential market

The residential market represents all real estate assets used to house individuals, whether for their primary or secondary residence, in both old and new buildings.

The health crisis has impacted the entire economy and the real estate sector has not been spared, even though it has come out of it a winner, being considered a safe haven. The residential market is particularly resilient, benefiting from a favorable context.

Indeed, the post-crisis recovery is better than expected, with a contained unemployment rate. Investors are also benefiting from attractive financing conditions, with the debt ceiling raised to 35%, interest rates still low and the loan period increasing. It should be noted that this advantage should be qualified because the High Council for Financial Stability (HCSF) could change its recommendations in January 2022. In addition, containment has led to an accumulation of French savings that has reached records, with nearly €205 billion (vs. 129.7 billion in 2019) according to the Banque de France.

The increase in real estate purchasing power is raising sales levels, which are 36% higher than the 2011-2020 average for older properties, given that, according to an Ipsos survey, 38% of French people are considering a real estate project in 2021.

This market dynamic is to be contrasted according to the type of property but also the geographical location.

Focus on old residential real estate

The volume of sales of older assets rose by 23%* in August 2021 over the 12-month rolling period, boosted by sales not made during the lock-ups, favorable borrowing conditions and a moderate rise in prices (+2.1%* in thesecond quarter of 2021). This appeal is all the more important in the provinces, with an 18%* increase (vs. 8% in the Paris region) in sales volume, primarily of single-family homes.

Indeed, if no massive urban exodus is envisaged, Parisians are more inclined to move to the1st or2nd suburbs or even to leave the Ile-de-France to take advantage of more spacious housing and lower prices. In the provinces, the same phenomenon can be observed with residents of metropolitan areas not hesitating to move to medium-sized cities on the outskirts.

Focus on new residential real estate

The trend in new residential real estate is similar to that of old real estate. There is a growing demand for individual housing units (supply has doubled in one year), offset by a decline in the appeal of apartment buildings and serviced residences.

However, the new housing sector is being impacted by a decline in production due to a drop in permits combined with rising construction prices, land scarcity and construction projects halted by the crisis. The supply (mainly in the Paris region) is therefore reduced, while demand is increasing, which has an impact on prices. In this context, the government has set up a new commission to identify and remove obstacles to the issuance of permits and is expected to include beneficial measures in the 2022 Finance Law.

A residential market

The various crises and confinements have led to a new awareness on the part of the French, who have modified their research and their expectations in terms of housing. The emphasis is particularly placed on well-being and health. Thus, air quality, the possibility of green spaces and exteriors have become the main criteria in the residential purchase. A July 2021 survey of 900 Knight Frank clients around the world showed that one in five residents have changed their residence since the crisis began. Of those who have not, 20% are considering it in the next 12 months based on a change in their work pattern (telecommuting or hybrid).

So while the residential market is marked by a shift in demand, it is not finished growing.

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