The property market end 2020: a return to stability?

For many sectors and particularly property, the year 2020 has been a rollercoaster, both in terms of activity fluctuations and the uncertainties caused by the health crisis. It seems that the end of the year may see a return to a certain stability that will allow the various players to look ahead more confidently. Explanations.

A protectionist banking history

We need to go back to 2019 to understand part of the property market situation in 2020. More precisely, the recommendations of the High Council for Financial Stability were encouraging a tightening of lending conditions at the time. Thus, a debt-to-income ratio exceeding 33% and loans of more than 25 years were situations to be avoided in order to ensure credit safety.

The authority of this institution led to fears that the market would slow down due to the increased difficulty in obtaining a loan. Such a policy stemmed from the fear of an economic crisis already anticipated even before the arrival of coronavirus and the lockdown that followed. The number of transactions naturally decreased from last winter: should we conclude that the health crisis had a lesser impact than might be thought? The months ahead will certainly shed light on this.

The post-lockdown boom

After legitimate concern, the expected effect occurred: the end of lockdown led to a strong market rebound. Several reasons can be cited:

• property transactions blocked since the beginning of the year could be signed;
• projects planned during the lockdown period were postponed to summer;
• the lockdown constraint gave rise to desires for more spacious housing with outdoor space, in both cities and countryside.

It was therefore after several months of restraint that estate agents saw their contacts, mandates and sales suddenly multiply. Demand for purchasing houses increased. Concerns about rising interest rates and a surge in prices proved unfounded, and the figures show that summer broke records in terms of output.

Such activity is reassuring for all industry players, as well as helping economic life return to a healthy cruising speed despite the health measures in place.

A return to normal this autumn?

Some have observed a lull in recent weeks and fear a sharp slowdown in the property market before winter. However, it is likely that the volume of transactions will indeed see a significant decline, but resulting rather from a return to well-known stability.

Let us not forget that the property market is cyclical and experiences usual seasonality that must be taken into account. It is common to find that spring is the most favourable period for creating a property project. The return of finer weather is probably a factor, as is the desire of families with children to use the school summer holidays to move. Conversely, the onset of autumn is rather synonymous with retreat and reflection, with its impact on household morale. Nothing extraordinary, therefore, to note a decline in purchase projects in September.

It should also be noted that the once again worrying health situation is certainly putting the brakes on some buying or selling decisions that will be triggered once the future is clearer. The threat of a second lockdown cautions those who were sometimes financially impacted by the first.

While it is difficult to predict the property market’s evolution without certainty about the health crisis, it seems premature to fear losing the benefits of this summer’s upturn. For now and since the lockdown, transactions are following a normal course, given the banks’ cautious policy.

You should also read: “Mortgage credit demand: putting all the chances on your side”.