Real estate: credit rates at their lowest, construction too

 

Paradox? If low mortgage rates are at a low level , the new construction market has been slowing for a year in France, as revealed by an Capital Lender study. The number of building permits and housing starts has dropped and is moving the government away from its objectives.

Inventory of building construction

Inventory of building construction

In a study carried out by Capital Lender this summer, we learn that housing starts fell by 3.4% between January and March 2018. At the same time, the number of building permits granted to property developers between August 2017 and the end of July 2018 decreased by 4.5%.

A decrease that hit both the individual house segment and the building segment. This trend has increased even since the second quarter of this year. From May to July, the fall in building permits reached 12.1% compared to data collected in 2017 over the same period.

Possible reasons for this slowdown

Possible reasons for this slowdown

If the objective of the current government is to cause a shock in the real estate supply by building more housing, via a simplification of town planning standards and administrative procedures , this deadline clearly leaves developers and investors perplexed, contributing probably partly to slow new construction in France. 

And yet, mortgage rates remain low

And yet, mortgage rates remain low

The slowdown in housing construction has no cause and effect relationship with mortgage rates, which overall are still among the lowest ever . In August, the average mortgage loan rate was 1.43% according to the Capital Lender. According to the bank, the minimum real estate rate over 7 years is limited to 0.55% at the national level in this fall , while the lowest mortgage rate over 20 years is 1.12% overall of French territory. A floor rarely reached, which is of course very favorable for investment in new.

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