A year ago the real estate market was booming but the outbreak of the pandemic put a stop to this euphoria. After a year of fighting Covid-19 and two national confinements, the real estate sector inspires confidence in the eyes of the French. However, he does not come out unscathed and is subject to the decisions of our elected officials …
Shortage and rising prices of new housing
The former Minister, Julien Denormandie, had made the promise to accelerate the digitization of urban planning acts. His ministry was committed to supporting communities in need of assistance in the transition to this digitalization. The initiative is good but a year after these announcements and the arrival of Emmanuelle Wargon, nothing has changed despite numerous reminders and incentives from the government, which has put on the table an envelope of 350 million euros to reward elected officials building above a certain threshold.
It is true that the pre-municipal election period is always delicate, as the saying goes “mayor builder, mayor beaten”, and the latter refuse to build so as not to upset the major balances of their municipalities and not to offend public opinion. Today the elections are over but building permits are still difficult to obtain. Why ? No doubt this is due to the deterioration of relations between the State and elected officials. Indeed, the abolition of the housing tax deprived the municipalities of 34% of their resources. And the compensation mechanism does not convince the mayors.
In the meantime, undelivered building permits represent just as much unbuilt housing. Developers have therefore repeatedly said they expect the loss of more than 35,000 new homes in 2021. This shortage, which comes on top of the numerous postponements linked to the establishment of the two confinements and the application of other restrictive measures, will automatically create a drop in supply and consequently an increase in the prices of new homes. In some regions, prices continue to increase, in the order of 2 to 4% depending on the municipality, because real estate operators find themselves with a commercial stock that has fallen below 12 months..
The sad game of supply and demand takes place and has a strong impact on our society. It is therefore urgent toact as soon as possible because the construction of 2021 and the housing of 2022 depend on the building permits that the operators obtain today.
Easing of debt ratios to revive the market
In 2020, the number of new mortgage loans fell by 18.1%, notably representing a significant decrease in loans granted to households with low incomes. In order to allow more people to access property despite the crisis and to support the market, the Minister of Economy and Finance, Bruno Le Maire, decided at the end of December to relax the recommendations addressed to banks. Thus, the debt ratio went from 33 to 35% and the debt period increased by 2 years, from 25 to 27 years.
An urban exodus not on the agenda
The confinement and the explosion of telework are reshuffling the cards and the desires of the French. According to a study conducted by SeLoger, 29% of Ile-de-France residents surveyed have broadened their research scope and are now prospecting far from large cities. Some medium-sized cities like Rennes or Nantes have therefore saw their prices per m² jump by more than 10%.
Even if these figures show an attraction for agglomerations, there is no vast exodus of the French from the big cities. The cfinely has therefore undoubtedly changed their aspirations, but they did not take the plunge.
New investors in residential real estate
Individuals are not the only ones who want to invest in residential real estate, institutional investors, who had previously neglected it for several years, are now fond of it. As proof, they were at the origin of more than half of block housing acquisitions in 2020. According to the Federation of Real Estate Developers, from January to June, reservations of new homes by institutional investors climbed 39%.
After taking an interest in offices, warehouses and shopping centers, some institutions are returning to housing because they see a lot of interest for little risk. First of all, the obsolescence of the property is limited, whereas after a few years, an office building is no longer up to date. Indeed, when you own a building with 50 or 100 units, the assumption that it empties out at once is weak. In addition, institutional investors have understood that this type of investment guarantees them good visibility on cash flows.
Fearing the impact of Covid-19 on the sale of housing to individuals, some developers have sold buildings en bloc. For example, CDC Habitat and Action Logement have undertaken to buy 50,000 homes from developers.
The arrival of these investors is a real boon for government projects: the transformation of offices into social housing goes in this direction. In 2020, 468 municipalities out of 1,035 did not meet their commitments in terms of social housing. Half of these cities will also be sanctioned for the first time. Witness to these many shortcomings, the Minister of Housing has logically called for an increase in the amount of fines.
2020 was thus an unprecedented year for the French economy, but also for the real estate sector. It could have been a record year if we are to believe the dynamics of previous years, but it was ultimately not the case.
The shortage of new housing production is a real scourge for new property prices, it seems urgent that the government take exemplary decisions to hope for a massive revival of construction.