Housing: between motivations and frustrations – Economic update, January 2025

Growth in the global economy and challenges facing Europe in 2024

In 2024, the global economy grew by 3.2%, similar to 2023, despite a contraction in international trade and rising geopolitical uncertainties. Inflation was kept under control on both sides of the Atlantic without triggering a recession, despite tighter monetary policy by the Fed (US Federal Reserve) in the United States and by the European Central Bank (between 2022 and 2023). Marking a pause, the monetary policies of both central banks led to a 100 basis point cut in their key interest rates in the second half of 2024.

In Europe, concerns are mounting in light of its economy failing to keep up with the United States and China. In 2024, French GDP (gross domestic product) growth of 1.1% reflects the impact of the 2024 Olympic & Paralympic Games in Paris, with inflation falling to 2% on average for the year.

Economic environment in 2025: challenges and uncertainties

2025 is beginning in an environment of complex global economic dynamics, with marked differences between the United States, China, and Europe. The situation in Europe and the international context highlight the specific challenges facing France; these include political instability – which is causing all economic actors to adopt a wait-and-see attitude and generating a feeling of disquiet – along with budgetary concerns fueled by large public deficits that are weighing down on the expectations of French businesses and households.

The French attachment to housing despite instability

However, successive crises and an adverse environment have not dampened the French attachment to housing, which meets their needs for stability and security and satisfies their patrimonial and social aspirations. In France, the economic downturn, the risks of social unrest associated with a deterioration in the general situation, a context of acute political uncertainty, and the long-term management of the environmental transition place real estate at the nexus of a large number of tensions. The slump in housing construction, however, is disrupting both a sector that provides jobs and ensures the equilibrium of various markets, including the market for existing housing.

20% of French people believe that the end of 2024 will be a good time to buy a home

Since 2023, with the housing market at a standstill, the issue of home ownership has reemerged in the political consciousness as a major challenge for individuals and society as a whole. However, reviving the sector through government support measures would require substantial budgetary expenditure, a particularly difficult option given France’s high public deficits and the current political turmoil.

Will lower interest rates, a moderate recovery in home loans, and an uneven decline in real estate prices – sometimes considered too modest yet still crucial to restoring households’ purchasing power – be enough to restore confidence in the future, which is essential to revitalizing the residential market by 2025?