French Economic Policy and Its Impact on the 2025 Parisian Real Estate Market: What Buyers Should Know
It’s been a wild few months, but all in all, Paris remains currently “on sale” and a safe investment, especially for US dollar holders.
In a move that has sent ripples through global financial markets, ratings agency Moody’s downgraded France’s outlook on October 25 from “stable” to “negative.’ opening the door to a potential credit rating cut as it cited concerns over the country’s finances. This downgrade follows the country’s significant increase in spending during the COVID-19 pandemic, as it provided extensive social support to its citizens to avoid a major economic and health catastrophe. However, with mounting debts from these measures, France now faces a difficult challenge in managing its finances.
A key issue that has contributed to this situation is France’s political landscape. After the snap elections in July 2024, the country finds itself with a split legislature, which has created gridlock on crucial financial decisions. Lawmakers have been unable to agree on the necessary austerity measures, such as raising taxes and implementing cuts to reduce the national debt to a more manageable level in relation to the country’s GDP. This lack of consensus has compounded France’s economic struggles and contributed to the risk of downgrade of its credit rating.
The good news is that ratings agency S&P maintained its grade for the French economy, saying on Friday, November 29, 2024 that the outlook was “stable” despite the European country’s mountain of debt and political troubles. This positive move happened despite and as expected – French lawmakers voted on Wednesday, December 4, 2024 to oust the government of Prime Minister Michel Barnier after just three months in office.
How Does This Affect the Real Estate Market?
One of the primary questions many investors and potential buyers are asking is: How will this affect the French real estate market and, specifically, mortgage interest rates?
The European Central Bank will trim 25 basis points (bps) from its deposit rate on December 12, according to all but two of 75 economists polled by Reuters, and at least 100 bps more next year as the economy slows and fears mount about US tariffs. While many economists expected that interest rates in Europe would decrease in early 2025, particularly as inflationary pressures eased across the continent, the situation in France is proving to be more complicated. According to our bank partners interviewed this week, due to the country’s debt issues and uncertain economic outlook, mortgage interest rates in France are likely to remain flat or even increase slightly in the coming months. Even so, French mortgage rates remain extremely competitive compared to other countries: 3.8% to 4.5% for 15 to 25 years, fixed for the entire duration.
What Does This Mean for Parisian Real Estate Prices?
For those looking to purchase real estate in Paris, the immediate impact of rising or stable interest rates is a good sign as that historically brings flat or even slightly decreased property prices.
However don’t forget these key points:
- Rising interest rates in France from 2022 to July 2024 stalled the market so a large demand to purchase has built up and created a backlog of buyers which will drive prices upwards
- Paris real estate prices are currently at their lowest on average since June 2020
- Parisian properties in the best locations with good bones have not historically had major price fluctuations due to economic shocks (+/- 3-5%)
Whether you are buying a “perfect” apartment or not – it’s clear that prices are at their lowest now. Despite current economic conditions, we predict that real estate prices in Paris will remain relatively stable in the near term and then increase slowly in 2025.
Higher Purchasing Power for Buyers with US Dollars
Additionally, for international buyers, particularly those from the United States, there is an added benefit: The US dollar remains strong, making Parisian real estate even more attractive. The US dollar has gained 6 basis points since the end September 2024 and is widely expected to remain strong in the first half of 2025. Effectively, that means that Paris property is “on sale” for US buyers right now.
What Should Buyers Do Now?
If you are considering buying property in Paris, the current market provides an ideal opportunity to buy with prices at their lowest and extremely competitive fixed French mortgage rates. While the political deadlock in France presents economic challenges, the Paris real estate market has remained stable and a safe place to invest through every historic market shock we’ve seen in the last 20 years. For US buyers with dollars, there has never been a better time to buy.
Our search team at Paris Perfect are experts in finding the perfect apartment for you to buy and we would be happy to speak with you about it. Check out our tips when you start your search and email our team at [email protected] if you’d like to find out more about buying an apartment in Paris.
