Residential Real Estate Market in France - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Residential Real Estate Market in France - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

France is currently witnessing a housing shortage, particularly for the lower and middle-class families. Demographic shifts are one of the major contributing factors behind this shortage. However, the demand for rental housing units is increasing, especially from the younger, working-class French population, while the demand-supply gap in housing units continues to remain wide.

The real estate market in France is anticipated to register an uneven growth in 2020. The growth is expected to be driven by continuous lower interest rates, healthy bank lending figures, economic growth of around 1.4%, and the impact of EUR 10 billion of tax cuts and new tax initiatives to revitalize the new build property market in France. During 2020, house prices in some areas of France, like Bordeaux, Nantes, Metz, and Saint Etienne, may continue to grow strongly. The areas around Toulouse and Montpellier may stabilize in terms of house price rises and sales. However, some areas, like Dijon, Poitiers, and Le Harve, may register a decline.

In 2014, France introduced the PINEL law to encourage the stagnant new build property market. The PINEL law provides a very generous tax relief of 12-21% to private investors. To qualify for this tax relief, private individuals must purchase a new build apartment or house and then rent it for at least six years, within pre-defined limits on the rent. The sales of new-build units continue to decline, which has led the French government to introduce a capital gains tax relief for encouraging landowners to sell land for development. This tax relief is likely to be applied to all the land sold between 2018 and 2022. This change is expected to enhance the number of new-build properties being purchased.

Key Market TrendsResidential Property Market in Upswing

The French residential property market has been in an upswing phase since 2016. During 2012-2015, the demand for houses and apartments, coupled with weak economic growth, was sluggish. However, the residential property market has started developing dynamically since 2017. With positive economic development, a decline in unemployment, and the historically low-interest rates, the general conditions are extremely favorable.

The county is witnessing a significant increase in the number of households. Given the positive demographic trend, combined with an increase in smaller households, a national increase in households of approximately 3.2% is expected between 2017 and 2022.

In 2019, around 5.5 million households were expected to be built in Paris, followed by Toulouse and Bordeaux, with an expected increase in households of approximately 6.8% (633,000 households) and 5.7% (579,000 households), respectively.

The housing starts in France increased to 37,400 units in October 2019, from 35,100 units in September 2019. Housing starts in France averaged 32,702.52 units from 2000 to 2019, reaching an all-time high of 50,200 units in November 2011 and a record low of 14,000 units in August 2014.

Increasing Homeownership Rates

Homeownership rates in France increased to 65.10% in 2018 from 64.40% in 2017. These rates averaged 63.32% from 2005 to 2018, reaching an all-time high of 65.10% in 2018 and a record low of 60.50% in 2007. France has lower homeownership rates than the global homeownership average rates, due to strong public pension systems and well-defined private contribution systems.

In France, homeownership is promoted as a part of the establishment of the post-war welfare state. The country favors homeownership by means of fiscal benefits (such as mortgage-interest tax deductions) and (indirect) subsidies (e.g. on construction or mortgage loans). Homeownership in France is also generally mortgage-funded, which allows higher loan-to-value ratios, thus, influencing more owners to purchase houses in France.

Competitive Landscape

The French residential real estate market comprises both local and international players. The market is dominated by few players. Some of the key real estate players in the market are Nexity, Bouygues Immobilier, Groupe Pichet, and Icade. The country also has the presence of some international players, such as BNP Paribas Real Estate and LinkCity. The sales proportion of residential real estate properties through the online market has consistently grown, owing to the rising internet penetration, increasing demand, incline in personal disposable incomes, surging middle-class youth population, and opportunities by government infrastructure investments.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies Mentioned

IBM Corporation
Oracle Corporation
Internap Corporation
Packet Inc. (An Equinix Inc. Company)
Scaleway Inc.
Amazon Web Services Inc
Rackspace Inc.
CenturyLink, Inc.
LightEdge Solutions, Inc

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