As interest rates rise in the region, are we heading towards two-speed real estate?

Should we be concerned about rising interest rates, the health of the housing market and households’ access to housing? Tensions in what has hitherto been a prosperous sector, particularly in the former Languedoc-Roussillon, are being confirmed.

Raising interest rates for the first time since 2011 in response to runaway inflation this Thursday, July 21, the European Central Bank confirmed the end of a long period of easy money. Historically low interest rates averaging 1.06% last December have since risen. Depending on the bank, they have risen by 0.4 to 0.7% over the course of a six-month period, and the trend is rising.

More demanding bankers, more rejections

The result: more difficult access to credit for private individuals. A clearer finding in the former Languedoc-Roussillon, where purchasing power is low, where Property prices remain high and properties for sale are scarce. Montpellier and Sète follow on the list of the most attractive cities, shortly after Narbonne, then Nîmes and finally Béziers, Carcasonne and Perpignan.

“Bankers continue to lend but are becoming more sophisticated in terms of profiles,” explains Laurence Deschatrette, a broker who has worked in the Montpellier market for 15 years. We’re starting to get rejections, mostly because of investor profiles or insurance issues for the elderly. Even 40-45 year olds who have no health problems and have good records face usury problems.

Worry for no-contribution buyers

Because another phenomenon characterizes the market: the wear and tear rate, which is intended to protect buyers. Threshold of the total credit cost (including interest, credit insurance, guarantees, administrative and brokerage costs) above which the bank can no longer grant credit is set quarterly by the Banque de France. However, its rise, capped during its July 1 revision, does not correlate with the observed rise in interest rates, leading to denials of credit.

“At the moment the files are going through because the bankers need contributions from customers. But in the next six months there will be a mismatch between credit capacity and market prices,” warns Laurence Deschatrette. “A good file from three months ago is no longer good today,” adds Dominique Pellier, real estate agent at ArthurImmo. A whole section of our population that does not contribute will soon no longer be able to buy. This is the paradox of a poor region like ours, with high prices, many buyers, few properties for sale and banks that are applying increasingly harsh conditions. between the rich and those of the poor”.

Discrimination in access to credit?

However, the period remains favorable for purchase. Even if they exceed 2% at the end of the year, lending rates remain cheap, far from the rates of 3% in 2014, 6% in 2001 and even less … 16% in 1980 after the two oil shocks.

And they stay below inflation. “We are still in a dynamic market in the region,” analyzes Jérôme Feriaud, President of the Chamber of Notaries of the Gard, who notes an increase in the volume of transactions in the first quarter, which has been thickening since April-May, as well as prices. “Everyone is very excited about what’s next. We’re heading towards a time when the real estate market is less prosperous,” he adds, pointing to “discrimination in accessing credit when the attrition rate isn’t right.”

The former Languedoc-Roussillon, with its many second homes, especially Hérault and Pyrénées-Orientales, may not be a large owner region in the future. “In 2007, the candidate Sarkozy said he wanted a France of owners,” recalls Bertrand Malquier, president of France’s Languedoc-Roussillon region. Today it is a utopia. The market has grown faster than the purchasing power of households. And with interest rates going up…”