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Motionless. Rising interest rates, falling loans… What should you remember from 2022?

The years certainly pass and are not the same for real estate. After a market completely turned upside down by Covid and the lockdowns in 2020, then a record year in 2021, the year 2022 is in total contrast.

While everything seemed to be looking good at the start of the year, a series of events came to halt the mad rush in property prices and sales volumes that began in 2016. Some were more or less expected, others less so.

Inflation, war in Ukraine…

Among the securities, inflation was observed from the beginning of the year. The reasons: the massive injection of cash at the time of the health crisis without counting on the lack of materials and labor.

Among the unexpected: the war in Ukraine, of course, which exacerbated economic tensions and supply difficulties. And above all the energy crisis, which in turn reinforced inflation. According to INSEE, the price increase was 6.2% over a year in November.

An inevitable rise in credit interest rates

All these elements together have helped turn the tide for the property market. The American and European central banks have raised their key interest rates, which has had the effect of increasing debtor interest rates, especially mortgage loans granted to private individuals.

From a historic low of 1.10% on average at the end of December 2021, mortgage rates rose to 1.33% at the end of June to reach 1.84% at the end of November 2022, according to the Banque de France .

The brokerage networks agree: rates will quickly exceed 2.2% from the start of 2023, and the 3% mark should be reached.

Buyers excluded…

While these rate hikes need to be put into perspective (we were borrowing more than 4% before 2011), they come after an unprecedented rise in the property market that began in 2016. Consequently, the few extra basis points are enough to exclude, month-to-month, more and more households from borrowing.

All the more so in a context characterized by tightening of the conditions for granting loans imposed by the High Council for Financial Stability (HCSF)which imposed strict criteria for 1eh January 2022.

Nor to forget wear rate, which has become the buyer’s scare this year. Calculated by the Banque de France on the average of the borrowing rates applied in the previous quarter, this wear rate was not raised quickly enough in light of the rapid rise in interest rates.

Result: number of files of buyers, but solvent saw themselves blocked in their financing, the banks did not have the right to grant a usurious loan.

2023: towards an even quieter market?

The year 2022 is thus totally misleading with regard to the statistics. Sales volumes are still very high (over a million transactions over 12 rolling months) and the value of the stone has not collapsed.

But make no mistake about it: the production of new mortgages is clearly slowing, and buyers are less present, especially in the big cities. This bodes well for a much calmer property market in 2023.

Buyers should thus regain control and negotiate the price of the goods a little more. If they can actually make their acquisition a reality. Because as long as inflation has not stabilized, the central banks will continue to raise their policy rates, which will drive up mortgage rates even more… Slowing down even more the momentum of a real estate market that has always been cyclical.



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