New construction in France has stagnated this year. Is this a crisis or an opportunity? Fewer new projects are being launched because developers only start a new project once current projects have been largely sold.
On average 80% of buyers are local French; they would like to buy a new apartment in their familiar village or city. The other 20% is purchased by foreign buyers who have always dreamed of a ‘pied-a-terre’ on the Cote d’Azur. The foreign buyer often has savings in the bank and is not dependent on a mortgage.
New construction in France: crisis or best opportunity to buy?
French buyers are being inhibited in their desire to purchase new construction. This has two causes. Three years ago, the mortgage interest rate in France was only 1%, making it very affordable for everyone. But since 2023, interest rates aligned with other European countries to an average of 4.2% (June 2024). For French buyers, this means a fourfold increase in the planned mortgage costs, which of course discourages them from making purchase plans.
For non-French buyers, the 4% interest rate is not intimidating. Thanks to our mortgage broker network, we assist many foreign buyers in obtaining a mortgage in France. The requirement is that Europeans must be capable of financing 30% of the property themselves.
Stricter regulations apply to buyers from other countries. For instance, American buyers interested in purchasing property in the south of France must provide 50 to 75% of their own funds. On the other hand, English buyers typically obtain a mortgage covering 60% of the property’s value.
Building materials more expensive
Another factor that contributes to the stagnation of new projects is the cost of new construction materials. These have increased by about 30% in the last two years. The war in Ukraine certainly plays a role in this; it has become more expensive to purchase the metal needed to construct steel-reinforced concrete.
The introduction of RT2020; the new French building standard to guarantee improved energy consumption of a home also leads to a greater demand for raw materials. And those raw materials largely came from Russia. Due to EU sanctions against Russia, the construction sector is forced to look for building materials that are scarce and therefore more expensive. A number of countries have chosen to export fewer building materials to Europe. For example, China supplies less wood and gives priority to the internal market
Project developers do not want to translate these developments and additional costs into higher sales prices. That is why they have chosen to take it a bit easier this year. Because of course, there will always be a turnaround; just look at the recent European Elections.
Advantages of buying now
There will be an extra opportunity in every village for foreign buyers to purchase new construction this summer. There are fewer local buyers so you have a wider selection to choose from. In the meantime, sales continue as normal; This summer, it is mainly the English and Americans who are investing in new construction.
Buying a new apartment offers two important advantages: the money is secure in an environment that consistently appreciates in value. When less construction occurs, the value per square meter increases. The rise in real estate value in France is a certainty that has continually grown over the years. The capital of the Cote d’Azur stands as a beacon of stability concerning real estate values.
The same applies to existing properties for sale; Those who have the money to buy can negotiate the purchase price well.
Growth of rental market opportunity
Those who cannot, do not want to or are not allowed to buy from the bank will always rent. For a homeowner or owner of a (new) apartment with all the luxury and comfort, the rental market is a growing market.
You can choose how you want to rent out your property; furnished per year or unfurnished per three years. The seasonal rental market also produces profitable rentals per week, although the net rental income will be almost the same at the bottom line.
Please be careful when renting out your apartment in Nice; Due to growing popularity, this city was the first municipality to tighten the rules. If you want to rent out in Nice, you must ask permission for this.
In short, this summer will provide foreign buyers with many additional purchasing opportunities!
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