The war in Ukraine, the geopolitical context will have consequences for the real estate market, in particular those related to a greater concentration of real estate wealth. The main reason is the consequences of the inflation shock. At 4.8%, consumer price inflation has peaked since the mid-1980s. Inflation was primarily driven by higher energy prices and to a lesser extent by higher food prices, two factors that particularly affect the budgets of less affluent households. These price increases are mechanically eroding income and putting pressure on purchasing power, which should decrease slightly this year. In short, the surviving, i.e., as soon as the restricted expenditures are deducted from the budget, it will stop and the banks which will lend will be more attentive in the coming months to some current expenditures which are likely to fall their bill.
This greater selectivity de facto excludes the most modest profiles from the market. It is certainly necessary to mention the 175 billion euros of surplus savings inherited from the Covid period and which were mainly accumulated during periods of confinement. But this surplus of savings is very unevenly distributed and concentrated on those with higher incomes who find themselves with enhanced means of investment. Another symbolic image of the inflationary shock and concerns about economic activity linked to the Ukraine conflict, long-term interest rates are on the rise. The 10-year rate on French government bonds, which serves as a benchmark for setting mortgage rates, is shrinking and moving away after being negative for two years. Admittedly, the movement is still embryonic in relation to real estate prices. But it is only a matter of time. The increase is already scheduled and will reduce the ability of the least privileged to access credit.
So part of the clients will temporarily disappear from the market, while the other, richer ones, will remain active, as a result of facing heavy trend, doubts about the future of pensions and anxiety, from the development of the stock market. According to a survey conducted by Caisse des Dépôts on “Retirement Expectations and Perceptions” in the spring of 2020, 78% of respondents are anxious or very concerned about the future of the pension system, and 40% expect they do not. pension upon their departure and 25% that the pension system is no longer in place.
Thus the question of the standard of living once the working life is over and the type of investments one should put into place arises naturally. However, if there are no risk-free returns, then this applies even more to the stock market, especially in the current context of high price volatility, one after another, in 2020, the consequences of the Covid-19 crisis and today the Ukrainian conflict . Not forgetting that in the long run, it took the CAC 40 index more than 20 years to surpass its historical peak in August 2000. On the contrary, sales in the old sector were maintained at exceptional levels, well exceeding one million transactions. And even if a dip in remittances this year is truly certain, prices, still on the rise, will resist, the stonewall that maintains this safe haven image, despite ridiculous rental returns.
It is the expectation of capital gains at the exit that makes the market. By stressing about richer families, the real estate market will reinforce the underlying trend towards real estate concentration: multi-owner French, who make up barely a quarter of families living in France, own more than two-thirds of the housing stock. Housing is owned by individuals. And if we limit the analysis to owners of 3 or more dwellings (that is, only 11% of households), then this represents almost half of the stock available to them, i.e. just over 4 times their share of the population.
This is a high-dose concentration and everything indicates that the movement will be strengthened because the premium for the owners already in place is huge, boosting investment in stone in the logic of asset accumulation, while the first joining – it will be more difficult.