Is the worst of the real estate crisis behind us? The question arises when looking at the relevant indicators the year 2024. If the real estate market stalled in 2023, it didn’t crash. The number of transactions remains very high (928,000 as per data Notaries of France).
What’s more, property prices have held up and investors looking for bargains have had to turn to energy grids, these houses were rated as E, F or G in the energy efficiency diagnosis. Properties on which some have occasionally succeeded negotiate discounts 20% on the displayed price when sellers were asking too much. Enough to largely fund the energy renovation work, while relying on state aid and certain rental investment schemes. The movement is expected to grow in the coming years. Other factors it is also likely to restore buyer confidence in 2024. Top 5 reasons to invest this year.
Reason #1: Mortgage rates will go down
A big culprit in the decline of the real estate market in 2023 remains a spectacular increase in mortgage rates in 1 year. According to ČSA housing loan observatorymortgage interest rates have increased on average 2.26%, all durations combined, excluding insurance costs, November 2022 to 4.22% in November 2023.
A spectacular jump that hits between 15% and 25% of real estate purchasing power individuals according to all brokers. But rest assured that in 2024 this upward trend could be reversed, as assured by economist Michel Mouillart, head of the Crédit Logement CSA observatory. He expects rates to continue to rise slightly in 2024, then “we will have a decline in real estate loan rates with a rate of around 3.50% at the end of the year”.
Reason #2: Prices that will fall
The downturn in the real estate market is largely responsible for the price erosion. According to data from notaries in France, real estate prices for old apartments down 2% in 2023 nationally and 5.3% in Île-de-France. A reduction that is still too marginal to make the buyer solvent.
But this decline is far from over, as notaries confirm: “At the end of January 2024, annual declines would continue to deepen -3.5% on prices for mainland France, -1.1% for the province and -6.8% for Île-de-France”. Real estate agents are on the same page, and the head of the National Federation of Real Estate Agencies (Fnaim) Loïc Cantin even claims that “So most of the price decline is probably still ahead of us.”
Reason #3: Last opportunities to invest in Pinel
2024 branding in new properties, the end of the Pinel system. Help for Rental Investment again sees a drop in proposed tax-free rates in 2024 has:
- 9% of the property price up to a limit of 300,000 euros for a 6-year lease
- 12% of the property price up to a limit of 300,000 euros for a 9-year lease
- 14% of the property price up to a limit of 300,000 euros for a 12-year lease
Pinel must definitely die out December 31, 2024Investors only have one year to decide. The opportunity is all the better as the prices of new properties in the big cities are starting to fall at the same time. in Nantes, in one year they fell by 4.7% and in Brest by 3.3%.
For the same period according to data from the Federation of Real Estate Developers (FPI). As the inventory of new properties for sale increases, developers agree to discounts or promotional offers for the extremely profitable Pinel investment.
What’s more, the zoning change decided by the government in October 2023 will make investments in Pinel more attractive in major cities such as Toulouse, Talence and Strasbourg.
For example, in Bordeaux, the maximum rent has increased from 10.93 euros per m2 to 13.56 euros, the city moved from zone B1 to A. For T2 near the train station 47 m² purchased for 249,000 euros, you go from one gross rental profitability from 2.84% to 3.56%.
Reason #4: Rent tension at the top
Another good news for investors: the strong tension that exists in the rental market. The shutdown of the transaction market, combined with the upcoming ban on renting some properties due to the Climate and Resilience Act, is reducing the supply of properties available for rent in major cities.
In a study published in September 2023 by Se Loger, the number of offers for rental properties in France fell by -18% on average from January 2022 and -9% just in the last twelve months. In Rennes they are 42.9% rental properties that have disappeared from the market. This trend allows first-time investors to be confident that they will find a tenant and thus avoid vacant periods that could affect their profitability.
Reason #5: Still strong profitability
Finally, despite the downturns in the industry, real estate remains the most profitable investment relative to the risk it presents. Rate Booklet is from 3% when the return on life insurance funds in euros in 2023 should be around the 2.50%.
For real estate, the average gross rental profitability is still between 3.3% for a city like Paris where prices are very high and rent regulated, and more than 10% in cities where prices are lower, such as Mulhouse, as indicated Fnaim real estate barometer from October 2023.