IMMONEWS #3 - Property market news March 2025

Interest rates: the easing continues

The trend that began at the end of 2024 is confirmed: mortgage interest rates are gradually declining after peaking at around 4.5% in early 2024, now standing at approximately 3.3% over 20 years in March 2025. According to a local barometer, the average rate over 25 years is even around 3.15% in March, its lowest level in many months. The best borrower profiles are managing to secure offers below the symbolic 3% threshold over 25 years, which would have been unthinkable just a year ago. This drop in rates directly improves households' purchasing capacity: at the same monthly repayment, a borrower can borrow approximately 20,000 euros more than a year ago thanks to this rate decline.

Banks, for their part, remain committed to an aggressive commercial strategy to attract borrowers. The rate gaps between institutions are
narrowing; some banks that already had competitive offers are maintaining their conditions, while others that were less well positioned are reducing their rates to catch up. This increased competition helps maintain attractive financing conditions for buyers. Nevertheless, observers remain cautious about the future direction of rates: while a further cut in the European Central Bank's key rate is being considered shortly, it could be the last for some time given the uncertain international context. In summary, March 2025 mortgage interest rates offer a welcome breath of fresh air for borrowers, with levels that have become reasonable again compared to the peaks reached in 2022-2023.

Mortgage lending: signs of recovery

After a particularly sluggish 2024, mortgage lending is showing tangible signs of recovery in early 2025. In January, the volume of new loans granted rebounded to 11.6 billion euros, a monthly level not seen for many months. This slight upturn marks a break from the continuous decline that began in late 2021. The percentage increase compared to last year should be put into perspective, given how weak 2024 was, but the trend reversal is real.

Household solvency is improving thanks to lower rates, which eases the constraint of the maximum 35% debt-to-income ratio. In practical terms, many applications that were rejected in 2022 or early 2024 are now eligible for financing in 2025: nearly a third of initially declined applications can now be approved. Notaries in the Paris region confirm a clear easing of lending conditions: they are seeing far fewer bank refusals, lighter guarantee requirements, and even the return of bridging loans to facilitate property changes.

Banks are once again seeking to finance property projects, taking advantage of the rate easing and controlled risk indicators. For example, 70% of them were offering rates below 3.7% over 20 years in February, giving the market a welcome boost. All of these elements point to a gradual recovery in mortgage lending, after the period of sharp contraction observed since late 2022. Caution remains warranted (banks are keeping an eye on the economic outlook and inflation trends), but the signals are generally more favourable for household financing than a year ago.

Tax measures and home ownership incentives

Several tax measures and assistance schemes have evolved at the start of 2025 in order to support property demand. The Zero-Interest Loan (PTZ), the main tool for assisted home ownership, has been extended and expanded in 2025. Most notably, its benefit has been reinstated for the construction of individual houses from 1 April 2025, after being excluded last year. This reintroduction of the PTZ for houses should encourage new buyers, even though it is causing some short-term hesitation: many households have postponed their purchase until March while waiting for the official return of the PTZ, which could create a catch-up effect in April with a rush for assisted loans. In any case, the PTZ remains a key tool and its continuation is welcomed as a lifeline for first-time buyers.

Conversely, the Pinel law, the well-known tax incentive scheme for rental investment, is in its final months. Originally scheduled to expire at the end of 2024, it benefits from a brief extension until 31 March 2025 for investments committed at the last minute last year. In practical terms, only purchases for which the preliminary agreement was signed before the end of 2024 can still benefit from the Pinel tax advantage by completing the deed in the first quarter of 2025. Beyond that, no direct replacement has been established so far, although discussions are underway to encourage rental investment in other forms.

Among other notable measures, a temporary exemption from gift tax has been introduced to help with the purchase of new-build properties within families: this tax incentive aims to facilitate money transfers between parents and children to finance a property project, particularly in new builds. Additionally, the 2025 budget has enacted new energy renovation grants to encourage owners to renovate their properties, which indirectly supports the market (increased value of renovated homes).

Overall, the 2025 Finance Act has been restrained in its innovations, constrained by the need to restore public finances. Nevertheless, the main property schemes have been extended or adjusted in a way that supports the nascent market recovery. These measures, although temporary, provide visibility for professionals and private individuals for the current year.

Existing property market: towards stabilisation

After a year in 2024 marked by a clear cooling, the existing property market appears to be entering a stabilisation phase in early 2025. The crisis that had been paralysing sales since autumn 2022 probably reached its peak at the end of 2024, and the latest indicators point to a gradual improvement. According to data from the Notaires de France, the number of transactions over 12 months has stopped declining: at the end of December 2024, 792,000 sales had been completed over the past year, compared to 780,000 three months earlier. This slight quarterly rebound, although modest, breaks with more than two years of uninterrupted decline (the historic peak was approximately 1.2 million annual transactions at the end of 2021).

In the Paris region, which was particularly affected in 2022-2023, the market downturn is levelling off gently. In the fourth quarter of 2024, existing property sales in the Paris region were only down 2% year-on-year, whereas the full year 2024 still showed a decline of -13% compared to 2023 (and -36% compared to 2022). Notaries in the Paris region note that the volume decline is fading and that prices have stopped falling. "Prices are no longer going to fall, they are even starting to rise slightly," says Elodie Fremont, spokesperson for the notaries of Greater Paris. In other words, the low point appears to have been reached in many areas.

On the existing property price front, the trend varies across geographical areas. In major cities, a near-stabilisation is observed following the slight corrections of 2024. For example, the average price in Paris in March 2025 is only 0.7% below its level a year ago, and some cities such as Toulouse (+0.5%) and Strasbourg (+0.3%) are even showing modest annual increases. Conversely, in many mid-sized towns or suburban areas, values continue to adjust downwards by around -2% to -5% year-on-year. This moderate correction, combined with the increase in property purchasing power due to low rates, gives buyers greater negotiating leverage. The result is a more fluid market than in 2022-2023, with sales being completed at more reasonable price levels.

Professionals are cautiously optimistic about the existing property market. According to the notaries of Greater Paris, "the correction in activity now appears to have been halted" thanks to the gradual improvement in household solvency and the return of lending. In practical terms, access to borrowing has become smoother (far fewer loan refusals, lower equity requirements), allowing more buyers to complete their projects. Of course, the market remains far from the euphoria of 2019-2021, but the path out of the crisis appears to have begun for existing property. If interest rates remain stable and household confidence holds, we can hope for price stabilisation and perhaps a slight recovery in transactions in the coming months.

New-build housing: a persistent crisis, but signs of hope

The new-build market continues to face a deep crisis, the result of a combination of weak demand and high construction costs. Despite this alarming situation, a few positive signals are emerging on the horizon for 2025. On the one hand, sales to owner-occupiers (primary residence purchases in new builds) increased slightly by +0.7% over the whole of 2024, a sign that household demand remains present whenever conditions allow. Even though investors have disengaged, individual buyers are cautiously returning to new builds, taking advantage of the drop in rates. On the other hand, the end of 2024 saw an encouraging upturn: in the last quarter, new housing reservations surged by +18% compared to the previous quarter, driven by somewhat more favourable financing. This late rebound, if confirmed, could signal a turning point and prevent the market trough from dragging on.

On the public policy side, awareness of the severity of the new-build crisis appears to be established, and measures have been initiated. The government has already activated certain levers to try to restart the engine: extending the PTZ across the entire territory, facilitating family donations for new-build purchases, and supporting building-friendly mayors in order to free up buildable land. Pascal Boulanger, the president of the FPI (French Property Developers Federation), welcomes the fact that this major issue "is no longer ignored by the public authorities" and thanks them for these initial actions, while calling for stronger and more lasting measures. Among the options being considered are the creation of a private landlord status to encourage investment in rental property, the simplification of planning procedures, and financial incentives for municipalities that build. The stated objective is for 2025 to be a pivotal year, enabling a rebound and the rebuilding of new housing supply commensurate with needs.

Regulatory framework: energy and housing

The year 2025 brings its share of regulatory changes for the property sector, particularly regarding the energy performance of housing. Since 1 January 2025, it has been prohibited to let properties rated G on the Energy Performance Certificate (EPC) -- these so-called thermal sieves -- now considered substandard. In other words, a landlord can no longer offer a G-rated property for rent, unless the lease was signed before 2025. This ban stems from the Climate and Resilience Law and is part of a progressive timetable: properties rated F will in turn be banned from being let from 2028 onwards. The objective is clear: to strongly incentivise energy renovation of the most energy-inefficient rental stock, in order to reduce its consumption and environmental impact.

While this measure aims for environmental improvement, it is not without consequences for the rental market. Indeed, there are fears of worsening the shortage of rental properties, with some landlords preferring to withdraw their unrenovated properties from the rental market rather than undertake costly works. Aware of this pitfall, legislators are already working on adjustments. A proposed law, supported by the government, is currently under review to ease the rules while maintaining the ban in principle. For example, a 5-year reprieve is being considered for co-owners who have initiated a building energy renovation plan. Other adjustments aim to clarify legal grey areas in order to avoid a flood of litigation and a sudden withdrawal of many properties from the market. The text will be debated in the Senate on 1 April 2025. If adopted, it would allow more flexibility (in particular, no immediate application of the ban for current leases, exceptions if the tenant refuses works, etc.), while maintaining the overall trajectory of eliminating thermal sieves by 2028-2034.

At the same time, quality control of EPCs will be strengthened. The government has announced its intention to crack down on complacent assessments and make this crucial document, which classifies properties in terms of energy performance, more reliable. An EPC reform is under consideration to incorporate new criteria (such as summer comfort) and avoid overly theoretical assessments that are disconnected from reality. All of these regulatory developments reflect the public authorities' desire to combine ecological transition and housing, finding a balance between environmental requirements and preserving available supply. Landlords are therefore encouraged to anticipate these changes, or risk seeing the profitability of their properties decline if they no longer meet the required standards.

Local focus -- Yvelines

The Yvelines (78) market reflects national trends while displaying its local specificities. According to February 2025 data, the median price of existing properties in the department stands at around 4,008 euros per sqm, down slightly by -2% year-on-year. Conversely, new builds in the Yvelines remain expensive and have even seen their prices increase: the median new-build price exceeds 4,370 euros per sqm, representing a rise of +19% year-on-year. This gap illustrates the current situation: the existing property market is adjusting downwards, while new-build developments -- rarer and more costly -- maintain high prices, driven by rising construction costs and supply pressure.

However, price trends vary greatly depending on the municipalities within the department. While some Yvelines municipalities are recording decreases of around -10%, reflecting the difficulty of selling at last year's prices in a tighter lending environment, sought-after and well-connected municipalities are beginning to see their prices rise slightly. Overall, the average price for all property types in the Yvelines stands at around 3,800 euros per sqm according to specialised website indices, with marked disparities between the highly valued eastern part of the department and the more affordable west.

In terms of volumes, the department experienced, like elsewhere, a sharp slowdown in transactions in 2024. Nevertheless, local professionals have been observing a slight uptick in activity since the start of 2025. The combination of more favourable interest rates and sellers who have become more reasonable on pricing is helping to unlock certain sales that had stalled. The Yvelines, benefiting from an attractive living environment and proximity to Paris, should benefit from the gradual recovery of the Paris region market. Rental supply indicators remain tight however (low vacancy, rents rising moderately by about +3% year-on-year), hence the importance of future construction projects to meet housing needs in the region. In summary, the Yvelines market is entering 2025 in adjustment mode, with prices recalibrating and activity slowly improving, pointing to a more balanced year than the previous one.