If you’re in the habit of checking real estate news, you couldn’t have missed last week’s news: the time it takes to make buying a property profitable compared to renting has never been longer — or nearly so. Such headlines that spoil the mood a little. And yet there is something to qualify. We will explain it to you.
So Meilleurs Agents explains that it is now necessary 12 years to make the purchase of 50 m2 profitable. On the Meilleurtaux side, count 15 years and 6 months to amortize the purchase of 70 m2. That’s 10 years more than in 2021. Yes, it hurts.
NO ! But we have a little more arguments in our pocket than this single interjection, we reassure you.
The fall in real estate prices has slowed
Here’s some good news for new buyers in recent weeks: real estate prices have started to fall in some major cities. Thus, a square meter in Paris symbolically fell below the 10,000 euro threshold and prices there fell by -4.5%. In Lyon, the decline is -8.1%, peaking at -8.6% in Bordeaux (source: Meilleurs Agents National Property Price Barometer).
The drop in prices taken into account when calculating the profitability of the tenant vs. however, the owner performed in these studies was greatly underestimated. Meilleurs Agents therefore expects an average price drop of -4%. As for MeilleurTaux, no decline is expected, their study predicts a simple slowdown in growth (+3% in year 1, then 2% in year 2, 1% in year 3 and 2% in year 4).
A scenario that can be doubted. Although the situation varies widely from city to city, a decline in property prices seems almost inevitable at current rates. Faced with a lack of solvent buyers, sellers will have no choice but to negotiate prices down. Bad news for those who bought recently, but a great thing for anyone looking to invest for the first time and buy their primary home in the coming months!
It is true that the profitability of buying real estate will take longer in 2023 than in 2021. But we have seen worse! So it took more than 20 years in 2008 and more than 15 years in 2011, according to Meilleurs Agents data. Another proof that the real estate market is cyclical like others and that it is necessary to see your investment in the long term.
Lack of rent growth. However, in many cities such as Strasbourg, Nantes or Marseille it exceeds 4% (+6.5% in Lyon!). Gold, if the rent increases, the monthly loan payment has the advantage of remaining fixed – are you following our view? A real estate loan therefore offers a guarantee of stability.
The good news fell by the wayside
It’s a common fact: when dealing with characters, we highlight some of them, while others are often forgotten. So reading the entire Best Agents study offers some good news that hasn’t benefited from the same lighting. Since there is not much good news in the real estate market these days, we are happy to pass it on to you.
First, while the time it takes to make a profit on buying property versus renting has indeed increased in several cities in France, the situation is different in others. In Toulon, Montpellier or Besançon, the numbers are therefore stable. And until Marseille, Lyon, Rouen, Metz and even Orléans, the time to profitability has shortened! Count 13 years in Marseille today compared to 22 last year. In Metz, the duration has been almost halved and it now takes 6 years and 6 months for your purchase to be profitable, up from 11 last year.
Of course, no one has a crystal ball, but it goes without saying that this is good news for future buyers who will regain their purchasing power.
A saving reflex that is a bit overrated?
However, this theory has its limits. The first is that it underestimates the impact of inflation on the rest of the lives of the French and that it ignores a simple but often proven principle: as income rises, so does lifestyle. So, it is not because you fictitiously “save” 500 euros so that the 500 euros can go to a savings product. And there’s a good chance they’re consumed for leisure and other everyday purposes (yes, that eternal rivalry between the cicada and the ant).
What’s more, the French may be adept at saving (they also rank the Livret A account first among preferred investments, ahead of rock), which does not make them prudent investors. Because knowing the most interesting and profitable products takes time and a little training. In fact, few people can boast of investing their money well. And despite fluctuating interest rates and real estate prices, real estate remains the easiest way to build wealth.
Buying your main residence is not just about profitability
Since, brake when buying, for first time buyeris less concerned with this type of study on the profitability of their investment than with the banker’s refusal to finance it. Even in times of rising rates, many people are looking for real estate – and we understand. During the loan, the rate is renegotiated. Are the prices still expensive? There’s no denying it, but the lack of solvent buyers leaves a lot of room for maneuver on the negotiating side.
We are far from wanting to minimize the crisis that the real estate market is currently experiencing. However, we must not darken the image. “I Gotta Have Faith”, sang a certain George. We can’t sway our hips, but we’d love to repeat the chorus.
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