Fri 13 Dec 2024 ▪
6
min reading ▪ by
Luc Jose A.
The year 2023 marked a significant break in the evolution of French household assets. After eight consecutive years of growth, this declined to stand at 14,567 billion euros, a drop of 0.9% compared to 2022. This decline, confirmed by an INSEE study and the Banque de France, sheds light on profound changes in the French economy. Mainly attributable to the fall in real estate prices, this phenomenon reflects the impact of recent monetary decisions, in particular the increase in key rates from the European Central Bank, which has increased the cost of credit and slowed demand. Real estate, once a key driver of household wealth, has found itself at the center of this crisis. In addition, prices, down 4.7%, weighed heavily on national wealth, although the 8.3% increase in financial assets partially mitigated the losses.
Real estate devaluation, an unprecedented trend
In 2023, the real estate assets of the French saw a significant drop of 4.7%, which constitutes a break with the trend observed for eight years. According to a study by INSEE and the Banque de France, this devaluation is mainly explained by the increase in interest rates imposed by the European Central Bank. This measure made real estate loans more expensive. Thus, it led to a slowdown in demand in the real estate market, which caused a widespread drop in prices nationwide. As this study published on Wednesday December 11, 2024 specifies, “the drop in prices has directly impacted the net wealth of households”, which thus reveals the vulnerability of a historically stable sector.
Such a contraction in real estate assets is all the more critical as it takes place in an economic context marked by growing disparities. Although household financial assets recorded an increase of 8.3%, supported by a revaluation of financial assets due to the same high rates, this was not enough to compensate for the losses in real estate. This situation reveals a double divide: on the one hand, between the different types of assets, and on the other hand, between the households themselves, some being more severely affected by this devaluation. Such developments accentuate economic inequalities and call into question the resilience of households in the face of changes in the real estate market.
A shock wave for businesses and public institutions
The fall in property prices in 2023 was not limited to households. Indeed, companies also saw their assets decrease by 10%, a fall largely attributed to the devaluation of land and the increase in their financial liabilities. This decline particularly affected non-financial companies, for which real estate assets play a decisive role as an economic lever. Furthermore, public administrations have not been spared. Their wealth saw a dramatic contraction of 27.5%, although this decline was partially offset by the gains recorded the previous year.
Thus, the repercussions of these developments go well beyond the accounting figures. The overall decline of 4.2% in national assets, a phenomenon not seen since 2014, reflects a generalized contraction in the country’s economic wealth. Despite some signs of stabilization observed in the third quarter of 2024, particularly after the decision of the European Central Bank to gradually reduce key rates, the real estate market remains under pressure. Buyers remain cautious, slowing transactions and hindering a sustainable recovery.
These trends reveal structural fragilities that call for in-depth reflection on public policies and investment strategies. While real estate traditionally constitutes a pillar of economic stability, its role is today called into question in the face of lasting uncertainties. Experts emphasize that market stabilization will require an adjustment of monetary conditions, but also measures aimed at restoring the confidence of economic actors.
This real estate crisis goes far beyond the numerical issues. Through the reduction of global wealth, it aggravates economic inequalities and raises doubts about the market’s ability to return to lasting dynamics. Although the price stabilization observed in 2024 provides a more optimistic outlook, many obstacles persist. Restoring investor confidence and relaunching real estate transactions will require adapted public policies and targeted investment strategies, capable of sustainably supporting a key sector of the French economy.
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Luc Jose A.
A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I took the commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand blockchain and seize the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to relay the latest technological innovations and to put into perspective the economic and societal issues of this ongoing revolution.
