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Real estate predictions for 2023

Real estate predictions for 2023

Three American regional banks went bankrupt at the beginning of March. Among them, the Silvergate Bank, the Signature Bank and especially the Silicon Valley Bank.  Although the authorities are reassuring, the Paris Stock Exchange still fell by 2.9% at the end of March. But the Minister of Economy, Bruno Le Maire assures that there is no specific alert.

Overall, in 2021, the volume of transactions increased by 14.5% compared to the period before the arrival of Covid, all types of property combined. All the indicators were therefore back in the green. By the end of 2021, usury rates were set at an all-time low of 2.88% for bridge loans, 2.43% for loans under 10 years, and 2.41% for loans of 20 years or more. In 2022, usury rates were set at 3.05% for loans over 20 years. By the spring of 2023, brokers had forecast a rate of about 3.50% for 20 years. And the trend will start to rise again with a rate above 4% during the summer of 2023.

Between a tight rental market, energy retrofit requirements and difficult access to credit, the real estate sector is expected to face many strains in 2023. Despite the climate of inflation and therefore rising interest rates, growth in the real estate market should continue this year, but at a slower pace. Thus, prices should continue to rise in France in 2023 with an estimated 3% price growth in the Paris market as a whole. 

However, real estate holds a special place for the French, as it represents 68% of net wealth.

Although the factors of wars in Ukraine, political conflicts and inflation suggest that real estate will experience a slowdown, there will be no particular impact on luxury real estate.  In fact, luxury real estate is standing out from the decline in property sales. This refuge sector continues to convince investors who keep in mind the experience of repeated confinements: the well-being in one's main or secondary residence is at the center of the motivations of high-end real estate transactions, with a willingness to make a point of honor to choose a home with an exterior. The demands of buyers are increasing and the already scarce properties are only increasing their potential.

There is a reason for this exceptional situation for this type of market with well-defined clients. Luxury properties are also investments that can be profitable for their owners: some of these properties are found on the rental market, particularly in Paris. Indeed, the supply of quality products remains limited and buyers in this price segment are not very sensitive to changes in interest rates. In addition, since the end of Covid, foreign clients have returned to invest in France, such as Americans for whom the borrowing conditions are more advantageous on French soil. 

And you, what do you think about the evolution of the real estate world for 2023 and the next years?