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What has happened? House prices in Paris have fallen to their lowest level in four years. Asking prices in June 2023 decreased by 4.1% year-on-year to €10,936 per square meter, the lowest level since January 2019, according to data compiled by Le Figaro. This is the sharpest annualized decline in at least a decade.
Causes. The pandemic has prompted some people to move out of Paris, and since then the changes in lending regulations have limited funding for potential investors.
French banks are not allowed to grant mortgage loans above a maximum rate, known as taux d’usure, which is set by the Bank of France. That constraint has limited lenders’ capacity to pass on the impact of higher interest rates to customers and led some to turn down loan applications.
In order to ease access to credit in the country, the cap rate has been reviewed on a monthly basis in the first half of 2023, instead of every quarter before then.
Homeowners in Paris will also have to face a 52% property tax increase this year, which Mayor Anne Hidalgo justified last year by rampant inflation and soaring energy costs.
Context. Despite steadily falling house prices, Paris remains the most expensive housing market among major European cities, more than double the level of Madrid and Berlin, Bloomberg analysts say.
Source: Bloomberg
Photo by Anthony DELANOIX on Unsplash
