The hexagonal stone market is showing insolent health (in large cities), boosted by incredibly low interest rates and particularly advantageous credit conditions, according to Century 21. And good news for borrowers in April, these already attractive rates for months have reached new records. Analysis of the real estate market of Loren Dy, president of Century 21 France and zoom on credit rates in April with Alex Bouler, spokesperson for Good Finance and Allen Bay, founder and managing director of Voufinancer.
Rates are supporting the stone market more than ever. For information, the average rates are currently 1.30% over 15 years, 1.50% over 20 years and 1.70% over 25 years but with negotiated floor rates at 0.6% over 15 years, 0.85 % over 20 years and 1.05% over 25 years for the best profiles.
In April, some banks lower their rates to 0.20%
“In April, the rate cut started in March seems to continue. Banks that had not yet done so lowered their lending rates from 0.05% to 0.20%. A national bank even announced to us that it intended to lower its rates again in the coming days after having done so in mid-March! “Throughout the month of March, and not just at the beginning of the month as is usually the case, we have received rate scales showing declines. The banks are feeling the resumption of demand and none want to miss out on this opportunity to attract new customers.
Especially since the policy of the Cream Bank and the decline in the French 10-year government borrowing rate, which fell to 0.23% at the end of March – but has since risen to 0.35 – gives the banks flexibility. offer new record rates! It is currently the big clearance sale of the spring of real estate! Explains Alex Bouler, spokesperson for Good Finance. What further boost the stone market which attracts the French!
In France: rental investment boosts sales
As proof, “26.6%: this is the share of acquisitions made throughout France for rental investment. More than a quarter of real estate purchases are therefore dedicated to placement, which demonstrates, if it were necessary, that the French see stone as an absolute safe haven, ”says Loren Dy, President of Century 21 France. “Whether it is to build wealth, to secure retirement or to have a salary supplement, real estate investment wins the majority of votes.”
Sales growth: + 9.8% in one year
“This greatly contributes to the dynamism of the market: at the national level, sales increased by + 9.8% compared to the 1st quarter of 2018, favored by incredibly low interest rates and particularly advantageous credit conditions”, Century 21 France announced today. “Sustained demand is affecting prices, which have increased contained between the 1st quarter of 2018 and the 1st quarter of 2019: + 2.7%, to stand at $ 2,587 the average price per m² (2059 $ the average price per m² of houses; 3506 $ that of apartments).
Overall, the average transaction amount reached $ 213,019 in the first quarter of 2019 ($ 227,879 for a house and $ 205,422 for an apartment). It is the under 30s who see their proportion among buyers increase the most strongly (+ 5.2%), and they now represent around 1 / 5th of transactions.
In France, 42% of real estate purchases are made by employees / workers. In a tense economic context, the French favor the purchase of real estate: it reassures, makes it possible to provide a roof over one’s head, is a vector of hope for added value and appears as a bulwark against the uncertainties of pensions. “(According to CENTURY 21 network transactions recorded at the national level between January 1, 2019 and March 26, 2019).
Historical records for loans over 25 years
If we compare the current rates to the historical level of autumn 2016, one of the big differences is the lengthening of the duration of the loans granted by the banks and the unpublished rates which they currently offer over 25 years. In February, 41.5% of credit production was carried out over periods of 25 years and more, against only 30.2% at the end of 2016 according to the Housing Credit Observatory / CSA.
“Lending over 25 years and more allows banks to attract young borrowers, still underbanked with whom they can establish a long-term relationship … In addition in the current context of declining purchase aid and high prices , especially in large metropolises, it is also the means to support the demand of first-time buyers and allow them to buy sufficient space in which to live and keep their property much longer, in order to amortize in particular the costs of notary . And given the current level of rates over these long durations, even borrowers with high incomes understand the interest in borrowing over 25 years and have the will, knowing that they will not go after their credit, for the most part! Explains Allen Bay, Managing Director of Good Finance.
Rate of 1.01% over 25 years granted to Nantes!
“This is how we are currently obtaining record long-term rates, well below the level of 2016 – where the record stood at 1.30% at best over 25 years – such as: 1.01% excluding insurance over 25 years in Nantes with a loan of $ 400,000 over 2 lines (1.09% over 25 years and 0.85% over 15 years) for a couple of second-time buyers with $ 8,000 of income and 100,000 $ contribution. Or 1.05% (excluding insurance) over 25 years in Nantes, for a loan of $ 450,000 for a couple of senior officials, first-time buyers, with $ 7,000 in income for two and $ 80,000 in contributions. And finally, 1.10% (excluding insurance) over 25 years in Saint-Etienne for the loan repurchase ($ 290,000) of a couple’s main residence with $ 5,200 in monthly income, “says Alex Bouler.
But risk of exclusion of some borrowers from the market!
Bad news for borrowers: the wear rate has again fallen to 1 April 2019. If the rate at which it is forbidden to lend is supposed to protect borrowers, it can become a drag on the ship of them who, given their riskier profile, may exceed it, thus finding themselves excluded from credit.
“The rate of wear and tear on mortgage loans over 20 years and more fell further by 0.05% this quarter, after falling by 0.07% in the previous quarter. In total, it fell by 0.40 % since January 2018, even though the nominal average rates over 20 years have only decreased by 0.15%! A chance that the credit rates fall again since March because as soon as they go up, it will surely be in the first place on long durations, with a real risk of scissor effect and exclusion of credit for some borrowers, ”warns Alex Bouler. To be continued.