- First of all, it is important to remember that the real estate market is a market that, like all others, responds to a simple law: supply and demand. The Covid-19 pandemic, by directly and indirectly influencing these two variables, has necessarily impacted the market.
The most visible impact is the awareness of households of the importance of their living space. They now see their home as a potential place of confinement. Combined with the generalization of telecommuting, many of them have decided to move. But beware, the share of those who have decided to move to the provinces remains marginal. The vast majority have simply moved to a bigger, quieter, more outdoor space, higher floor, etc., giving liquidity to the market. This liquidity is synonymous with an increase in the number of apartments available for sale in Paris (supply) and an increase in the demand for quality apartments. Thus pulling up the quality apartments and down the rest of the real estate stock.
The pandemic has therefore led to a two-tier market where quality goods are constantly increasing, driven by a constant demand from households looking for a better place to live. While lower quality goods are not increasing or even decreasing.
The second impact of the pandemic is the confirmation of Parisian real estate as a safe haven. The flood of liquidity seen in response to the pandemic has led to a general rise in the various markets in which to invest (stocks, bonds, art) and to significant volatility. By buying Parisian real estate, French and foreigners alike are not only buying a certain profitability (the rate of non-payment is very low) but also a guarantee of preservation of the value of their assets, which contributes to the duality of the market by enhancing the value of the typically Parisian stone buildings.
The final impact of the pandemic is that interest rates have remained historically low. In 2019, many predicted that rates would rise in 2020. The pandemic has kept those rates near 0, pushing households into debt and keeping prices rising.
The triple impact of the pandemic on the Paris real estate market therefore explains its resilience. Only a rise in interest rates, negatively impacting demand and profitability, could hinder this trend.
