Since December 2021, buying a property (especially for rental investment) has been a challenging journey: every month that went by, interest rates increased, property prices decreased, and regulations became stricter (notably the Climate Law).
The dynamic is about to be completely reversed.
The decrease in rates
This is a first: it’s done, the rates have started to decline! Timid for now (-0.3 points), it should accelerate in the months to come.
With inflation being contained, the prospects for monetary easing have become almost obvious for the financial markets.
Where a buyer was paying their rate around 4.5% in November 2023, we are now at 4.2% in December 2023. And if the trend continues, it is very likely that we will fall back below the symbolic threshold of 4% as early as the first quarter to approach 3% by mid-year.
This is almost 20% more borrowing capacity for borrowers.
A first revolution after 2 years of continuous increases.
And don’t forget: a rate can be renegotiated. If you borrow today at 4.2% but the rates were to drop in a few months/years, your bank can easily agree to align your rate with the current one.
A slow rise in prices
And in the wake of the drop in rates: the stabilization and then the rise in property prices are to be expected. Because the year 2023 is the first to have seen a drop in prices in the French market since 2015. Certain areas like Paris, Lyon, or Bordeaux have experienced declines of up to 10% over 2 years.
It is highly likely that the drop in rates will give new momentum to the French residential market, especially in large cities where the loss of purchasing power has been the most severe with the rise in rates.
Prices therefore have every chance of moving forward again as soon as the market becomes aware of the downward movement in rates and that borrowers are once again creditworthy. And as soon as the recovery is initiated, the euphoria could quickly take over to drive prices up!
A reform of the DPE?
Finally, from a regulatory standpoint, an interesting evolution is underway for real estate investors: the method of calculating the energy performance certificate (DPE), which has become the nightmare of investors, could be reformed. The goal is to make the DPE fairer for small spaces (less than 30m2). Today, these are penalized in 2 ways: first, the energy consumption related to hot water and, secondly, the ratio between the so-called "loss surface" (through which heat escapes) and the living area of the home.
To put it simply, all small spaces are currently heavily penalized by the calculation method. Starting from January 2024, the government is expected to favor the implementation of a "weighting coefficient" that should significantly improve the DPEs of small spaces. With 1 year to go until the cut-off date of January 1, 2025 (the date by which G DPEs will be banned from rental), this verdict is highly anticipated!
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