- French real estate agents forecasting -8% drop in housing transactions in 2021
- Pandemic impact on economic uncertainty in 2021 causing reticence among sellers and caution among lenders
France’s national real estate federation, the FNAIM, is forecasting that sales of existing homes in France will fall some -8% to 900,000 in 2021 from 980,000 sales in 2020. This prediction was made at the same time that the FNAIM Chairman, Jean-Marc Torrollion said the housing market had been “remarkably resilient” with home prices rising +4% in 2020, despite COVID lockdowns.
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This forecast predicting that sales volume will drop by -8% in 2021 is the lowest such prediction in five years. On the other hand, the FNAIM is expecting that home prices will remain relatively stable through 2021.
The COVID pandemic’s potential impact on the French economy in 2021 is the reason for this turn-around in thinking. French real estate agents believe that the pandemic’s effects on housing sales will be expressed with economic uncertainty, sellers not wanting to risk that uncertainty via negatively impacting home prices and that cautious lenders may make it more difficult for buyers to obtain financing.
Bruno Le Maire, France’s Finance Minister, is predicting a “difficult” first quarter for France’s economy with a “significant” rebound in the second half of the year. As in the United States, low interest rates in France will continue to sustain home prices but household and economic confidence levels are the open questions.
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According to FNAIM Vice-President Loic Cantin, “The evolution of the economic situation, unemployment difficulties, and a decline in the solvency of certain buyers will be decisive for the level of transactions. (Also) we’re headed toward less supply available on the market and will perhaps also face harder-to-finance households.”
Much of the basis for such reduced expectations in sales volume come from a December survey by FNAIM that indicated 47% of its members saw a general tightening of credit restrictions. Banks were simply refusing home loans to particular homebuyers working in industries hardest-hit by the pandemic. The French Banking Federation in December stated that banks were committed to “…prevent over-indebtedness.”
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