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The Explosion of the Parisian Real Estate Market

After the transactions freeze that suffered the French real estate market in 2008 in response to the 2007-2009 economic crisis, since 2010, goods' prices as well as sales' volume grew again to reach historical peaks.

Following a return to a sales' volume close to that average level observed from 1999 to 2007 and an annual increase of the Parisian real estate market prices of more than 13% according to the Notaires-INSEE index, the square meter in Paris actually costs the record price of €7,000!

The first cause of such prices is explained by a much insufficient supply for an ever growing demand due to investors who want to secure their capital by buying stone as one buys gold. Parisian real estate is for many a financial refuge in a world where all marks disappear and many are ready to pay more and more to get this rare but very visible product.

This increase is also due to the lowest interest rates thanks to the same principle. Investors massively buy government's bonds thinking it is still one of the rare financial products that will resist these difficult times and as a consequence, interest rates fall, which permit buyers to hope for a more flexible mortgage, at less than 3% on fifteen years.

All this strengthens even more the demand for Parisian real estate and continue to push prices up. For the government, this situation is dreadful as it drives out of the city the middle class, the modest families, and also the students and many foreigners who could wish to settle in. Yet, the Parisian real estate market's functioning should not change in the months to come according to Notaires-INSEE and sales will continue to be supported by the interest rates weakness.

The rental market has not followed the same increase. In 2010 the rental market in Paris has increased of not more than 1% in average over the last 12 months.

(MMC, 25 of November 2010)

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