Why are property prices collapsing in certain regions?

Why are property prices collapsing in certain regions?
Why are property prices collapsing in certain regions?

An unprecedented fall in property prices

According to Fnaim, housing prices have fallen by 3.8% on average over one year. Loïc Cantin, president of Fnaim, underlines that “this drop is the strongest observed in 15 years”. Certain territories, notably large French cities outside Paris, saw their prices plummet by 6.1% between the end of May 2023 and the beginning of June 2024. Rural areas and seaside resorts were relatively less affected, with declines of 2.8% and 3% respectively. Paris, for its part, recorded a fall of 7.7%.

The reasons for this decline

The main explanation for this trend is the sharp rise in mortgage rates in 2023, which reduced the borrowing capacity of potential buyers. Fnaim even anticipates an acceleration in the fall in prices, projecting a drop of between 5 and 7% by the end of the year.. Uncertainty over future policy rate cuts from the European Central Bank (ECB) adds to this forecast.

Geographic disparities in price reductions

Variations in property prices are not uniform across the country. The most urbanized departments such as Loire-Atlantique (-7.4%) and Rhône (-8%) are the most impacted. These regions, where prices were already high, were particularly sensitive to rising rates. Conversely, departments such as Creuse (-0.7%), Finistère (-0.5%) and Alpes-Maritimes (-0.3%) experienced much more moderate declines..

Departments on the rise

Despite the general downward trend, certain departments are recording price increases. The Alpes-Maritimes (+2.7%), Haute-Corse (+2.5%) and Côtes d’Armor (+2.2%) are notable examples.. These territories, mainly located on the coasts, benefit from strong tourist demand and a limited supply of accommodation.

While certain large cities and urbanized departments are experiencing sharp declines, other more rural or tourist regions are showing resilience, or even an increase in prices. The rise in mortgage rates remains the main factor in this dynamic, making the French real estate market particularly uncertain for the months to come.

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