New real estate: why prices remain very high despite the crisis

Sales continue to collapse in new real estate. But unlike old real estate, prices are not falling.

If you are betting on a price drop to buy the new apartment of your dreams, you are not out of the woods. Despite the real estate crisis that has been going on for two years now, the prices of new homes do not drop. Or so little: they decreased by 1.1% on average in France in the second quarter of 2024, over one year, according to data revealed by the Federation of Real Estate Developers (FPI) this Thursday, September 5. They are thus remaining at nearly 5,000 euros per square meter, the same level as when the real estate crisis began, just two years ago.

This average, however, masks a disparity between Île-de-France and other regions. In the first, new home prices fell by 5% in the second quarter, while they stagnated in the provinces. This is normal, as they had risen significantly in the Paris region before the start of the crisis.

New property prices do not obey the law of supply and demand alone

However, new housing is far from being snapped up like hot cakes. Sales have fallen again in the second quarter, by almost 9% over a year, with interest rates being too high preventing many French people from having their mortgage application accepted.

So why aren’t new property prices plummeting for good, as is the case for old properties, where they have fallen by almost 4% over the year to the end of June according to Fnaim? Quite simply because new property prices, unlike old property prices, are not determined solely by the law of supply and demand. Developers must in fact pass on to the sale prices the costs of construction standards (there are frequently new ones), land (increasingly rare due to the fight against soil artificialization) and materials, which remain expensive after the supply difficulties linked to the post-Covid recovery and the war in Ukraine.

Promotional offers to watch out for

And promoters can hardly make efforts on their margins. “They are only 5% on average. If we lower them by reducing our sales prices, the banks that finance us risk refusing to grant us financial guarantees for the completion of construction programs.”explains Pascal Boulanger, president of the FPI. The opportunity for the latter to point out the government strategy in recent years: “They did nothing to boost housing construction, convinced that the fall in sales would lead to a plunge in prices. A futile strategy in new construction”.

Do not despair, some developers, in the midst of a real estate crisis, are making promotional offers. Either at the time of launching their construction programs, to allow the marketing of a sufficient number of housing units to start work. Or at the end of the program, when there are still unsold properties in buildings ready to be delivered. Notary fees offered or a discount of 2,500 to 5,000 euros is always good to take!