The conditions for granting credit linked to fears about the solvency of households affected by the consequences of the health crisis as well as the higher rates make it more difficult to access property.
Covid-19 seems to continue to dampen the dynamics of the real estate market. After two years of very low rates, silver is starting to cost more than inflation again. In the space of a month, the average credit rate fell from 1.18% to 1.25% in May 2020. A rate similar to that of May 2019 which, however, worries stone lovers. “Because of the coronavirus crisis, 42% of future buyers express more concerns about obtaining a mortgage to make their project a reality” assures Séverine Amate, spokesperson for SeLoger. According to the latest wave of the Observatoire du Moral Immobilier, carried out by SeLoger with 2,517 future buyers from the start of deconfinement, 72% of future buyers who had not yet studied their financing before confinement fear that the rise in rates will slow down their project. They are 61% on the side of those who have already studied their financing before considering this black scenario. Despite this gloom, they would be 7 out of 10 future buyers to think that they will manage to buy a property.
However, borrowing has become rarer and more expensive in recent months. Count a drop of 41% between March and May 2020 compared to the same months of 2019. As well as a drop of 39.7% in the number of loans granted over these same periods.
Effects of coronavirus and HCSF
The economic effects of the health crisis are weakening the economic situation of some households and seem to make it more difficult to access debt. “There is no red list for the sectors of activity but it is possible that the files of a manager in the event or a Renault employee will be studied with more precautions than last year.recognizes Maël Bernier, of Meilleurtaux.com on Le Figaro. Banks cannot be blamed for not lending to insolvent households.”
However, this tightening of loans also bears the name of the High Council for Financial Stability (HCSF) – the authority which advises the Minister of Finance. Last September and December, this authority considered that there were risks for the financial stability of the French economy. “Even if the risk remains contained at the moment, the trends observed continue a medium-term vulnerability” he explains in September 2019 after having calculated that the indebtedness of the non-financial sector in France (individuals and non-financial companies) amounts to 133% of GDP in the first half of 2019. In December, he recommends a action plan to limit “the downward trend in loan conditions which guarantee their robustness, and to prevent an excessive dynamic of household indebtedness.“These recommendations have been followed up with the gradual increase in rates which, according to the Housing Credit Observatory / CSA”clearly weighs on the market dynamism observed until now.”
First-time buyers main victims
More difficult and fewer grants have allowed, according to the Observatory, to note that “the demand solvency indicator is recovering“. However, the first victims of this credit crunch according to first-time buyers.”The share of borrowers with the least personal contribution who generally bear the least favorable rates – modest borrowers and/or those who are first-time buyers – has further declinednotes the Observatory. This partially neutralized the rise in loan rates announced in banks’ schedules.“Understand that if the average rate is only 1.25% because loans over 25 years at 1.51% found fewer takers.
However, those who want to access property for the first time and who have not been discouraged have extended their credit period. 51% of them have been in debt for more than 20 years, “the highest level observed so far” comments the Observatory. In 2019, they were 48.9% to sign this contract duration against 44% in 2018 and 30.4% in 2016. Yet despite these bad signals, the price of real estate continues to grow. Optimism despite the rigor or real estate bubble announced?
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