Covid-19 pandemic has savagely damaged economies world over and it is still spreading unchecked in different parts of the world. Among the other industries, real estate is also the one to take its toll. In many French cities, property prices witnessed a fall. However, prices of ‘Parisian properties’ stayed unmoved by the catastrophic effects of the lethal virus. This is what makes Paris, along with other major French cities, an ideal city for investment in real estate.
Although prices saw a decline in some parts of France, but in major cities property prices saw a surge right after the confinement. In June 2020, property prices averaged at 10,586 euros, net rise of 0.4%, in the French capital. In Lyon it was 0.7%, and in Lille property prices saw an increase of 0.8%. According to ‘Les Echos’, real estate prices of June 2020 reflect an astonishing euphoria.
The rise in property prices have surprised the real estate experts, which quite logically expected a decrease in the demand of Parisian properties followed by some adjustments in the prices. However, this has not been the case. One reason may be the backlog of those transactions that were underway when the French government announced the confinement. Only a few property deals were cancelled. In the other words, as the ‘confinement’ was over, property business started as usual, although with protective measures.
35% more transactions after the confinement.
Another important indicator about the real estate market is the increase in the number of transactions, which are almost 35% more than the summer of 2019. According to the experts of real estate, the backlog of the transactions underway before 17th March, when the confinement started, is not the only factor responsible for this increase. In fact, there are more offers for the property sale then they were in the same period of 2019.
It may be disappointing for those who expected a fall in the property prices. Until now, this is not happening. The buyers do not seem to have postponed their proposed acquisition. In fact, there are 23% more buyers than sellers. Demand is higher than the supply and thus increases in property prices. On July 1, 2020, the average price per m² amounted to € 2,690 on the national territory and to € 10,586 in Paris, i.e. for these two amounts an increase of + 0.4% compared to June 2020.
The most important question, however, is if this trend will continue or not. According to expert opinion, it is too early to say that. Therefore, market rebound in terms of transaction volume and prices must be viewed with caution while making investment plans in real estate.
Nevertheless, a couple of factors can play an important role. First, this is the unemployment rate. According to ‘Bank of France’, the unemployment rate in France could reach the 11.5% mark by the mid-2021. In real numbers it would mean that by the mid of 2021, one million more people will lose their job.
The other important factor is the tightening of conditions for the credit to invest in real estate. In the post-corona period, we have already seen an increase in the mortgage rates. At the end of 2019, the average mortgage rate was around 1.12%. However, at the end of the month of May 2020, the mortgage rate stood at 1.25%. Apparently, this increase in the rate looks so small. But if we compare it in two different periods, which are not very far from each other, this change appears very important. In addition, such an increase has not been seen in the last 3 years.
Conclusion
At present prices of Parisian apartments seem unaffected by the COVID-19 pandemic, and thus investment in Parisian properties is a safe bet. However, in the months to come, mortgage and unemployment rates will play an important role to decide the returns on the investment. For certain buyers, this time is ideal to buy a property in Paris, while for others it may be better to wait and see.
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