French real estate market faces instability amid rising rates

The French real estate market is facing significant instability characterized by a decline in new construction and stagnation in the existing housing sector. While demand for homeownership remains, potential buyers are hesitating due to financing difficulties and a lack of confidence. New home reservations have dropped by 50% compared to 2021 levels, with severe declines in regions like the Nord and Centre-Val de Loire.

In the existing housing market, transaction volumes are expected to plateau, with sales projected between 900,000 and 955,000 for 2026. Property prices are also showing signs of decline in several major cities, including Montpellier, Nantes, and Marseille, though rural areas have seen price increases.

Economic indicators suggest further pressure on mortgage rates. The 10-year French government bond (OAT) rate reached 4.24% in early September 2026, up from under 3.6% in June. Additionally, the European Central Bank is preparing a 0.25 point rate hike due to inflation, which is expected to drive bank lending rates higher. Industry professionals note that recent government fiscal measures and support programs have had limited success in revitalizing the market.