The French real estate market has gone through an unusual phase between 2022 and 2024: a rapid rise in credit rates, a contraction in the volume of loans granted, and a decline in prices in the existing market. This conjunction has reignited the question of a real estate bubble in France, even as the signals sent by the market point in contradictory directions.
Contraction of mortgage credit: a structural brake on bubble mechanisms
A classic real estate bubble relies on massive and poorly controlled access to credit, which pushes prices beyond what household incomes can absorb. The French scenario of 2024 presents the opposite profile.
Real estate financing has contracted significantly in 2024, according to data from the Banque de France. The production of housing loans has dropped compared to the levels observed between 2019 and 2022, a period when historically low rates had boosted demand. Less credit distributed means mechanically less upward pressure on prices.
The regulatory framework has also played a filtering role. The High Council for Financial Stability has maintained its safeguards on the maximum effort rate and the duration of loans. Its decision on December 18, 2023, effective from January 1, 2024, adjusted certain parameters without loosening the reins: the threshold for works qualifying for a deferral has been lowered to 10% of the total cost of the operation.
Bridge loans have also been partially excluded from the calculation of the effort rate under strict conditions of ratio. Analysts are monitoring these developments on bulle-immobiliere.fr, where discussions on pricing mechanisms fuel regular market tracking.
This prudential locking limits households’ ability to borrow beyond their means. It is precisely this type of safeguard that was lacking in the United States before 2008 or in Spain before 2010.
Prices of existing real estate in France: confirmed decline in 2024
Figures from Insee show that existing prices have declined for most of 2024. Annual variations have remained negative in the first, second, and third quarters, with a decline still present in the fourth quarter. Île-de-France recorded a particularly marked drop.
This decline contrasts with the dynamics of the years 2015-2022, when prices had risen almost continuously in major metropolitan areas. Paris, long the market’s locomotive, has seen its rates correct significantly.
One point deserves attention: this price drop is not accompanied by a collapse in transaction volumes comparable to what is observed during the bursting of a bubble. The market is slowing down, sellers are adjusting their expectations, but there are no massive forced sales or cascading defaults. The scenario resembles more a deflation than a crash.
Price-to-income ratio and Friggit curves: where does the imbalance stand?
One of the most reliable indicators for spotting overheating remains the ratio between housing prices and household incomes. Historical work conducted by the CGEDD, often referred to as Friggit curves, has shown that this ratio left its historical tunnel in the early 2000s.
After two decades of disconnection, the correction that began in 2023-2024 has started to bring this ratio back toward less strained levels, without re-entering the reference tunnel. Several factors complicate the reading:
- Credit rates, even after their rise, remain below the levels of the 1990s-2000s, which partially supports purchasing power despite high prices.
- The supply of new housing has contracted in recent years, with a significant decline in construction starts. This scarcity of supply limits the potential for price drops in certain tight areas.
- Requirements related to energy performance diagnostics create a two-speed market: energy-inefficient properties are heavily discounted, while renovated properties maintain their value better.
The available data do not allow for a conclusion that the market has returned to equilibrium. They indicate an ongoing adjustment, the final extent of which will largely depend on the trajectory of key interest rates and the pace of new housing production.
Risk of a real estate bubble in 2024: a nuanced diagnosis
Talking about a bubble implies that prices are driven by speculation and easy credit. In 2024, neither of these two engines is truly active in France. Credit is contracting, rental investors are retreating in the face of rising rates and tightening energy standards, and first-time buyers are struggling to complete their applications.
The real risk lies elsewhere. It relates to the geographical fragmentation of the market. Some metropolitan areas like Lyon, Bordeaux, or Nantes have seen their prices decline significantly, while well-connected medium-sized cities are faring better. The French real estate market does not form a homogeneous block, and applying a single diagnosis to the entire territory leads to misleading conclusions.
Another factor of uncertainty concerns the stock of energy-intensive properties. Homes classified F or G in energy performance diagnostics face progressive rental restrictions. This regulatory pressure could lead to concentrated sales over time, with a localized downward effect on certain market segments.
The overall picture for 2024 is that of a market in correction, not a bubble on the verge of bursting. Vigilance remains necessary regarding credit and local imbalances, but the prudential mechanisms in place make a scenario of a generalized crash unlikely in the current context.
