Roche & Cie

French Real Estate in 2017 : Forecast

05 Jan 2017

According to the Laforêt network, the property market will continue to grow in 2017, Investors will remain motivated by attractive interest rates, even if the trend is rising.

Following the 2016 trend, the stone market will continue to grow in 2017 due to continued strong demand from individuals. Overall, the market should benefit from the attractiveness of interest rates and the increase in the purchasing power of the French.

The first half of the year looks promising, although the interest rate trend is on the rise, although it remains at historically low levels.

“Only a violent rise in rates could contract the market, confirms Yann Jehanno, executive director of the Laforêt network. The first half should be dynamic in the image of what we experienced in 2016 “.
Moreover, the fear of a rise in rates will rather encourage potential buyers to finalize a transaction.
Increasing purchasing power

This good momentum is explained by the increase in the purchasing power of the French. Since 2012, their financial capacity has increased by 26% with a sharp acceleration in 2016, explains Laforêt, the equivalent of one more piece, on average, per property. Households benefited from price correction and lower interest rates. “Property mortgage prices have been halved since 2012. We have gone from 4.5% to 1.5% on average,” says Yann Jehanno. The best files were even able to borrow below 1.5% in the fourth quarter.

On the whole, individuals benefited from these favorable conditions in order to realize an acquisition, with the possibility of building up a real estate portfolio and creating additional income.
According to the site

The year 2017 will be conditioned by three major keys:
1. Changes in interest rates
2. Employment
3. Elections

  • The rates of government bonds have increased since the end of 2016 in the United States, Europe and therefore in France. For 30 years, rates have been very tight on both sides of the Atlantic, even though the economies are not always in tune. These rates are the best indicators of the evolution of mortgage rates. In this context, we expect mortgage rates to increase between + 0.5% and + 1% to reach 2 to 2.5% over 20 years. In this scenario, we believe buyers will not be discouraged, that they will be as numerous as in 2016 but no more, and that prices will not be pushed up.
  • As far as employment is concerned, an ever-increasing proportion of French people are unable to find a permanent job and therefore can not meet the requirements of banks to obtain a home loan. We do not anticipate any significant change in this direction in 2017, which will not see a major increase in demand.
  • Finally, the presidential elections and the subsequent legislative elections remain sources of uncertainty. The final candidates are not known and have not disclosed their program in their entirety. It is difficult, under these conditions and at the beginning of the year, to anticipate the impact of these elections beyond a traditional wait-and-see attitude during the election period. But again, we imagine a good resistance in volume compared to 2016 because the attraction for the stone, safe haven, will remain strong in a context of strong political and geopolitical uncertainty.

To conclude on figures, we are considering for 2017 price changes between 0 and + 3% with a volume of transactions from 830 to 850,000 in the old residential real estate.

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