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I. How Economic Headwinds are Shaping French Real Estate Projects
Market conditions in 2025 favored more real estate projects than in 2024, without unreasonable expectations regarding acceptable prices from both sellers and buyers. Demand has largely shifted towards the existing housing market, where supply is slowly recovering. The increasing prevalence of transactions outside of the Paris region – in the provinces – has continued since the beginning of the year, mirroring similar trends in pricing. However, the market remains uneven, with some areas seeing diminished activity, others showing signs of improvement, and still others facing persistent challenges.
The existing home market has shown some modest recovery since hitting a low point in autumn 2024. Transaction volumes dipped slightly starting in May, likely due to political and budgetary uncertainty and an increase in property transfer taxes. Despite the rebound in activity, price trends over the last six months suggest a market where supply and demand are moderately balanced. While a long-term correction is largely behind us, year-over-year gains are modest, stronger in the provinces and for apartments than in the Paris region or for houses. Nevertheless, the situation is improving, with prices rising in nearly two out of three markets compared to half six months ago.
The new construction market is rebounding. Housing permits have increased significantly (+28% year-over-year from April to September), and construction starts are following suit, albeit at a slower pace (+9%). However, volumes remain very low. Growth is being driven by owner-occupied housing and intermediate rental properties (+13% and +9% respectively). The market is currently divided into two distinct segments:
- The real estate development sector is projected to hit a historic low for the third consecutive year, nearly 30% below levels seen between 2018 and 2022. Demand from individuals is declining for the fourth straight year. Across regions, diverging trends in transactions and prices signal a disconnect between supply and demand;
- Production of standalone single-family homes has seen a noticeable increase in the last six months (+20% compared to the previous six months), benefiting from the expansion of the zero-interest loan program since April 1, 2025.
II. Is a Widening Gap Emerging Between New and Existing Housing Markets in 2026?
The current stability in interest rates could give way to a slight increase by the end of the year, continuing into 2026.French citizens, aware of the deteriorating economic and financial environment, are increasingly accepting interest rates above 3%. Furthermore, with the stabilization of key interest rates and the completion of adjustments to its balance sheet, the European Central Bank’s monetary policy is no longer putting downward pressure on financing costs at this horizon. In this context, the rise in the 10-year government bond yield will partially impact mortgage rates, due to the production structure favoring first-time buyers. This atypical configuration is expected to persist next year, bringing the average interest rate on new mortgages to 3.35%.
Housing sales are expected to follow varied trajectories. Since the beginning of 2024, buyers have felt the timing is slightly more favorable for purchasing than sellers feel it is for selling. Simultaneously, the recovery in transactions benefiting the existing housing market is based on a slight increase in borrowing. Looking ahead to 2026, the deteriorating budgetary and financial environment (rising rates coupled with rising unemployment) is expected to weigh on real estate activity, particularly in the existing home market. The recovery in new home sales will be visible only in the single-family home segment, and even then, will be moderate compared to volumes recorded before 2023. Without support measures for investment rentals, sales from real estate development will remain at their current floor.
In this context of a slight decline in transactions and strong uncertainties eroding French confidence, price dynamics in the existing housing market are expected to be compressed: +0.7% in 2026 after +1.0% in 2025. Perspectives for price increases remain limited, both among buyers and sellers.
Regarding mortgage lending, new production has stabilized in recent months. First-time buyers represent the most important and dynamic component of this production. As such, in 2025, the mortgage market rebounded more strongly than real estate variables (prices and transactions): +29%. In 2026, the less supportive budgetary and financial context is expected to negatively impact household housing purchase decisions and, consequently, borrowing, which will see a slight decrease.
III. The Private Landlord: How Have Things Changed Over the Past Three Years?
While the profile of investors has changed little since 2022, the regulatory, budgetary, and financial environment for making a rental investment has deteriorated significantly. This population represents 11% of French residents aged 18 and over. They are more urban, more affluent, more often live as couples, and own their homes without an outstanding mortgage (53% vs. 35% of all French residents).
What about French residents who are not currently private landlords but are interested in becoming one? They represent 23% of the French population in 2025 (-1 percentage point compared to 2022). The proportion of 30-49 year olds within this population has increased significantly, from 39% in 2022 to 45% in 2025. They are most often managers or artisans (41%), but the proportion of workers/employees wanting to invest in rental property has increased (38% vs. 33% in 2022).
When questioned three years apart, four key trends emerge:
Trend #1: Investment profiles and strategies are evolving. Private landlords are more likely than in 2022 to own multiple properties (41% vs. 38%). They report owning more apartments than in 2022 (70% vs. 64%) and have generally been renting for longer (32% report renting their property for more than 10 years vs. 24% in 2022). Unfurnished rentals remain the primary mode of renting (56%), while furnished rentals (30%) or seasonal rentals (14%, +2 percentage points vs. 2022) are gaining ground.
Trend #2: More private landlords now want to exit the market than invest (25% vs. 23% respectively), primarily due to the burden of taxation. In 2022, 30% wanted to continue investing compared to 18% who were considering exiting.
Certain landlord profiles stand out, particularly based on their 5-year strategy:
- Those aged 65 and over express a stronger propensity to maintain their rental investment as is (56% vs. 40% of all private landlords);
- Those aged 75 and over are more likely to want to exit (36% vs. 25% of all private landlords).
In addition to the burden of rental taxes (32%), other reasons for exiting are the complexity of property management (25%) and the need for renovations due to energy efficiency standards (20%).
Trend #3: For 45% of private landlords, rental profitability is the decisive criterion, well ahead of other criteria, even though it has declined slightly in the hierarchy of motivations over the past three years (-5 percentage points). Simultaneously, building retirement income is increasing (+5 percentage points), as is the possibility of passing on a property to a child or loved one (+7 percentage points). Among the obstacles to undertaking a rental property operation, the difficulties a landlord could face with a tenant (52%) come first, ahead of rising taxes (41%) or renovation financing (33%). Over three years, owners are more likely to report concerns about the ability to rent due to DPE standards (+4 percentage points to 21%).
Trend #4: The expression of these concerns may explain the increase in management entrusted to a professional by one in two landlord owners in 2025 (+9 percentage points compared to 2022). In addition, landlords report a decrease in difficulties finding tenants over this period, as well as a decrease in significant damage to rented housing (-4 to -5 percentage points since 2022).
Any use of this data must include the mention “BPCE L’Observatoire”.
