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Real estate prices in France are falling, but have we seen the last of expensive housing? Far from it! Price distortion has reached a level that will take a long time to resolve. And this rise in property prices is a global phenomenon.

A study by Natixis offers a captivating panorama of rising prices worldwide, a phenomenon that really took off in the early 2000s. Since 1990, residential real estate prices in relation to household consumer prices have risen by around:

• 190% in Australia
• 180% in the Netherlands
• 155% in the United States
• 110% in the United Kingdom
• 95% in Canada
• 80% in France
• 60% in Italy
• 40% in Spain
• 15% in Germany
• -25% in Japan

A considerable real increase (a percentage over and above inflation), except in Germany and Japan. Central bank money printing, launched at the turn of the 2000s, explains most of this rise. Money printing forces savers and investors to turn to real assets, the quantity of which increases only slightly, if at all. 

The same phenomenon can be observed in equities*, works of art, classic cars and, of course, gold, which underwent a revival at this time.

Subsequently, the operating methods specific to national real estate markets explain the disparities in impact, between relatively constrained markets (Australia, Netherlands, United States depending on the state, United Kingdom, France) where prices soared, and more flexible markets (Spain, Germany, Texas in the United States) where construction helped limit scarcity. Another case in point is Japan, faced with a declining population.

In France, prices are not falling that much, due to a dysfunctional market (taxation, regulations) and rising interest rates, which restrict demand.

However, as Natixis points out, the consequences of this massive and persistent increase in real estate prices are having a number of serious adverse effects:

• Reduction in disposable income for uses other than housing;
• People moving out of city centres, increasing journey times;
• Unjustified enrichment of homeowners;
• Young people no longer being able to buy a home;
• Households being pushed into excessive debt.

It's important to understand that the prolonged rise in real estate prices is creating a crisis of its own, on top of the current crisis (inflation, particularly in energy and food prices). It's starting to take its toll. The problem is that the return to reasonable real estate prices may come too late, as the crises have done too much damage in the meantime to really benefit from them...

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