Crisis Or Opportunity ? The Future Of Real Estate In France

Is the value of a real estate property still based solely on its location? While the French market is undergoing its most significant correction in decades, the dynamics of the sector seem to be reversing. After a sharp drop in prices in 2024, the year 2025 is shaping up to be one of profound transformation for the market. From large metropolises to medium-sized cities, from deserted offices to less accessible housing, a shift is taking place, driven by an unprecedented economic and regulatory context. Between rising interest rates, tightened credit, and new environmental demands, real estate must rethink its fundamentals.

A brutal correction reshaping the market

The year 2024 will be remembered as a major turning point for French real estate . Indeed, the market recorded a historic drop in prices of 6.8 % year-on-year, a correction of unprecedented magnitude in decades. Some cities, previously considered bastions of real estate dynamism, are on the front lines of this decline: Bordeaux (-9.1 %), Nantes (-8.2 %), Lyon (-7.5 %). Such a drop now extends well beyond large metropolises, which also affects medium-sized cities that had enjoyed a post-Covid resurgence of attractiveness. Thus, “the French real estate market is undergoing an unprecedented multifactorial crisis,” explains Nicolas Brosseaud, General Director of Catella Valuation.

The causes of this decline are multiple and deeply rooted in the structure of the market. Unlike previous crises (the one in the 1990s caused by overproduction or that of 2008 linked to credit excesses), the current context results from a combination of factors. The rise in interest rates, which limits access to credit, adds to increasingly strict environmental regulations and an evolution in real estate usage. Furthermore, the traditional market model, based on assured long-term profitability, is being called into question.

The tertiary sector in full transformation: a revealer of the ongoing shift

The office market, often seen as a leading indicator of real estate trends, illustrates the scale of the ongoing upheavals. In Île-de-France, the vacancy rate now reaches 10.2 %, and even climbs to 19.7 % in the inner suburbs. This vacancy level is reminiscent of that observed in 1993, when supply dramatically outstripped demand. But unlike this cyclical crisis, the current transformation is structural: the widespread adoption of remote work and the rise of flexible office spaces are disrupting demand.

Residential real estate is also feeling the effects of this transformation. The rejection rate for real estate loans has now risen to 35 %, while purchasing power in real estate has dropped by 15 % compared to 2021, according to the Crédit Logement/CSA Observatory. Even SCPI, long perceived as safe havens thanks to yields of 6-7 %, must reassess their strategies in the face of declining profitability. The era when property was synonymous with financial stability seems to be over.

Beyond simple price corrections, the real estate market is entering a new phase where the value of properties will no longer be defined solely by their location. “2025 could mark the beginning of a structural transformation in the sector,” says Nicolas Brosseaud. From now on, adaptability to new uses and environmental performance will become central criteria. With the implementation of stricter regulations regarding energy performance, poorly rated buildings risk losing even more value in the market.

This overhaul of real estate fundamentals will reward investors able to anticipate these changes. Opportunities exist, but they require a more nuanced approach: compliance with environmental standards, the development of hybrid models between residential and tertiary usage, and increased flexibility to meet the new expectations of users. For those who will be able to adapt, the future offers interesting perspectives , in a market where the old model of real estate as an asset is no longer sufficient to ensure profitability.