Real Estate: unreleased interest rates for the “darlings of banks”

With loans fell 2% on twenty, loan insurance range, buyers have gained real purchasing power. Sales volumes are close to record levels.

The still low-interest rates became the main fuel of a real estate market expanding. “If you were wondering if it was still possible to reach record levels, the answer is yes! In September, the banks continue their run at lower rates, “wrote eg Empruntis broker in his return to conditions of the letter published Monday. “Whether national or regional banks, almost all show declines,” the study added.

Average rates offered by banks are at exceptionally low levels: 1.20% over ten years, 1.45% over five years, 1.65% over twenty years as the barometer established by the broker. But this commercial display that makes the buzz, it is still adding 0.36% point under loan insurance. What makes the real rate of 1.8% over fifteen years and 2% over twenty years. This cheap credit is the centerpiece of solvency of the buyers. “The historically low-interest rates generate a massive increase purchasing power and allowing more households to consider buying a primary residence,” says Sebastien de Lafond, president of which published Tuesday a study on trends in the real estate market in Paris and the ten largest French cities.

Purchasing Power Gain

Thus, by paying 1000 euros a month at the current rate of 2% (including insurance) over twenty years, it is possible to borrow a capital of 191,600 euros against only 175 600 euros a year ago, in September 2015, when rates were 3% for a similar duration. Again real purchasing power of EUR 16 000 (9%) generated by the mechanical effect of the rate cut. And if we go back further, “the purchasing power gain reached 23% compared to current levels in 2011,” according to Alexandra Cuxac Francis, president of the Federation of developers (REIT).

The credit does not become free if: via 191 600 euros over twenty years, the total cost of credit will be 48,400 euros (13,800 euros loan insurance). Cecile Roquelaure, Director of Studies and the Empruntis communication notes that the decline in interest rates is particularly favorable to the wealthiest real estate buyers. “The premium borrowers who have high incomes and a significant contribution benefit from low-interest rates especially.” These “darlings of banks,” according to the network brokers sell loans at 1.2% over twenty years.

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“We are in a market in massive infusion”

This very favorable financing environment grows sales volume to levels close to a record. Century 21 reported a 14.4% increase in the number of transactions in the first half 2016 and “activity continues to be strong in the third quarter,” the network. For its part, the network of Guy Hoquet Real Estate announces sales growth of 10% in July compared to the same period in 2015. “We are in a submassive infusion market,” Sebastien de Lafond analysis, citing course rates low but also public facilities such as the new Ready to zero (PTZ) entered into force on 1 January 2016 and which improved the solvency of first-time buyers (households that access for the first time in property). Not to mention the tax Pinel device that allows investors who buy housing for rental development in the nine to benefit from substantial tax cuts. calculated that between May 2015 and May 2016 the number of transactions increased by 19% year on year totaling 830,000 sales in the former.

In this expanding market, prices have started to rise in most cities. Paris recorded an increase of 2.7% since the beginning of the year. Same upward trend in most of the ten largest cities of the Hexagon Lyon (+ 3.5%), Bordeaux (+ 2.9%), Nantes (+ 2.2%), Lille (0, 6%), Toulouse (+ 0.5%), Montpellier (+ 0.4%), Rennes (+ 0.1%). Prices remain however on the downside in Strasbourg (-3%), Marseille (-1.1%) and Nice (-0.2%).