Up-to-date information about the real estate market on the Cote d'Azur: trends and price dynamics
Сrédits Photos Yann Vernerie. The year 2022 marks a turning point in the real estate market in the southeast of France. First, there was the shadow of Covid-19 and its many variants. A health situation first cast a shadow on the rental market before boosting the sale of houses. Then the beginning of 2022 will certainly be marked by a wait-and-see attitude both on the part of buyers and sellers. Election years tend to be a time when the French are relatively cautious. And then there was the beginning of the war in Ukraine at the end of February 2022. The main geopolitical fact that mechanically accelerated inflationary trends that took place already at the end of 2021.
COVID-19 AND ITS IMPACT ON REAL ESTATE
We will not return to this difficult and painful episode for a significant part of the population. However, if the uncertainty about this virus remains total, the French have understood one thing since April 2020: it is better to stay in a house in the countryside than in an apartment in the city center.
This has therefore resulted in a marked increase in demand for villas and houses with gardens over the past two years. The real estate market therefore logically began to tighten from 2020-2021. Goods with zero defects left very quickly, as usual. Today the market is very tense since there is almost no more stock and the market is almost exclusively fueled by forced sales (death / inheritance, departure to a retirement home, divorce, professional transfer). For example, there is an increase in real estate of +6% for the period 2021-2022.
In terms of seasonal rentals, the health crisis had a significant impact on the direction to France. Indeed, health measures taken in various countries seem to have discouraged the French from traveling abroad. The prospect of being stuck in quarantine waiting for a negative PCR test seems to be pushing families to stay in France.
TELECOMMUTING HAS WIDENED SEACH AREAS FOR BUYERS
But the emergence of this respiratory virus has also broken the company's taboo against telecommuting. Employers who did not plan for their employees to work remotely realized that this practice is not harmful to their business. Indeed, remote work tends to focus on what happens in the office. Because those who work hard in person tend to work more when they are at home. On the other hand, this new practice has made it possible to optimize rental office space and therefore to achieve substantial savings. In other words, telework allows the size of the rented surfaces to be reduced. Consumables and office occupancy costs also fell, while domestic consumption remained relatively stable. For its part, the government massively helped companies. Moreover, the French saved during the crisis. This forced savings has mechanically increased household savings and therefore their personal contribution in the event of a real estate project.
As a result, remote work has become commonplace. Many employees spend two to three days working remotely from home. The consequences of this new organization of work were not long in coming. Many employees did not hesitate to take the plunge and set about buying their dream home, having moved significantly from their place of work. Properties that used to take time to sell are now in high demand among service workers.
THE WAIT-AND-SEE ATTITUDE DUE TO THE ELECTIONS
This is a phenomenon well known to real estate professionals. Election years are always periods when activity is generally slowed down. Even if no objective reason manages to explain this phenomenon, this habit is a great classic on the real estate market. But generally we observe a catch-up once the deadline has passed. The year 2022 will not fail to honor the rule. Thus, the re-election of the outgoing president will not cause turmoil in the real estate market.
However, when purchasing, potential buyers will pay more and more attention to the insulation of houses. The ALURE Act, the Climate Act and other future laws are likely to force buyers to be more careful about the energy classification of homes.
THE IMPACT OF THE WAR IN UKRAINE ON REAL ESTATE
Foreign clients have always boosted the real estate market on the Côte d'Azur and in the Alpes-Maritimes department. Obviously, in the next few years, the Russian clientele will not be as active as usual. The war in Ukraine and the devaluation of the ruble will be a turning point for many players in the sector. Nevertheless, it can be noted that with the outbreak of the war in Ukraine, both Russians and Ukrainians stormed many seasonal rentals, wanting to take the maximum step back in a tense geopolitical situation.
Economically, the conflict in Eastern Europe will have repercussions for the global economy. The rise in price, especially in primary industries (energy, timber, building materials, transport, food), is undeniable. Thus, inflation will also play a role in the coming months in the real estate market.
DETETIORATION OF THE SITUATION IN THE MORTGAGE MARKET
As we mentioned above, the gradual increase in rates risks alienating some potential buyers from the real estate market without discouraging the most motivated ones. Today we observe that the rate of personal contribution in the Provence-Alpes-Côte d'Azur region is about a quarter of the amount of the requested loan. On average, this is 75,000 euros. It should be noted that the personal contribution jumped by almost 40% over the year (from 52,500 euros to 75,000 euros). While the average amount of loans fell by almost 8%, rising from 261,500 euros in 2021 to 241,000 euros in 2022. Summing up, we can say that banks require more personal contribution and therefore the amount of loans issued by banks falls mechanically.
However, a fall in prices in the context of inflation is not a scenario that can be foreseen in the medium term. When there is inflation, real estate can be a safe haven. “The stone doesn't lie.” With the rise in rates, a correction is sure to be needed for goods that cannot be financed, but demand will remain strong. Simply because in the long term, we risk seeing the liquidity of the wealthiest households slip into real estate. We will not fail to describe this situation in detail in our next press release.