Hoped for by real estate professionals, the continued easing of rates announced by the ECB on December 12 is a real breath of fresh air. Their hopes: that the Frankfurt Institution does not stop there and continues its momentum in 2025. Stuck between the need to find a balance between supporting growth and the risk of reviving inflation, the relaxation will indeed continue according to our scenario in Xerfi but perhaps not as markedly.
The drop in rates: a fragile hope
The fall in rates is currently the alpha and omega of a real estate market where all other parameters have turned red: crisis and political instability, total vagueness on future housing policy, growing concerns among households on the evolution of unemployment and their financial situation, finally fears of a future fiscal tightening. The cup is full. There remains therefore the reduction of the cost of money as the last lever to emerge from the crisis. As the European Central Bank is launched into a cycle of monetary easing, it is won.
Not so simple except for variable rate loans, but they represent a very small part of the production of housing loans (around 3% over the last 10 years). This is also a specific feature of the French market. For this category of loans, the interest rate is periodically revised based on a benchmark index, often linked to interbank rates such as Euribor, that is to say the interest rate used by banks when They lend each other money. Now that the mechanism is underway, variable rates will begin to decline and will continue the movement in 2025. The story is not necessarily the same for fixed rates.
French debt: a potential black swan
Fixed rate property loans are generally granted over long periods (between 15 and 25 years). For these loans, banks often finance themselves on long-term markets or base their prices on financial instruments of similar duration, such as 10-year government bonds (OATs). Their level and their evolution are partly linked to the monetary policy of the ECB. But other variables are at play such as expectations of inflation, economic growth, the geopolitical context, the exchange rate, the ups and downs of the financial markets and the greater or lesser belief of the markets for a country to honor its commitments. vis-à-vis its creditors. This is paid for by a risk premium.
This is where the French debt poses a problem and where the political imbroglio is a sword of Damocles. Because if the rating agencies remain, until now, benevolent, the financial markets have started to sanction the French economy. Two markers: the stock market and the rate spread between France and Germany. This rate gap constitutes an indicator of choice for measuring the confidence placed in France vis-à-vis Germany. The higher it is, the more investors express their concerns about the country. A sign of recent tensions, the OAT-Bund spread, which had been moving in a tunnel of between 45 and 55 basis points since the start of the year, has suddenly tightened since June 10, climbing to more than 80 points. base. If doubt arises a little more about the French capacity and/or desire to confront its debt and OATs will start to rise again, driving real estate rates, despite the easing of short rates led by the ECB. French debt could well be the black swan of real estate.
