Young borrowers, the attractive real estate acquisition?
Young borrowers are increasingly interested in real estate investment. Becoming a homeowner is an important moment in a life: with the confinement, and the Covid-19 pandemic, this need is strengthening. Young borrowers, under the age of 30, therefore take steps more widely to buy a property. These are most often populations called “first-time buyers”, who have never invested in a real estate acquisition in the past. For the latter, the conditions of access to real estate credit are tightening … However, the desire to become a homeowner remains even stronger and encourages these new investors to turn to real estate acquisition.
More young borrowers since 2020
Investing in real estate is attracting more and more people. Indeed, becoming an owner makes it possible to build up a patrimony, and the conditions are favorable to this kind of investment. Also, credit rates are low and attractive,especially for first-time buyers. A situation that is also felt on the number of files finalized by young borrowers under 30 years, up 3.79% between 2019 and 2020. Indeed, these borrowing rates are attractive for real estate purchases, allowing you to invest without being too indebted.
In addition, the High Council for Financial Stability has restricted the conditions for granting a mortgage, which encourage banks to be more selective. This generates many refusals in the face of the files of young borrowers and first-time buyers, the categories of buyers most impacted by these changes. The debt ratio is higher. Usually, banks refuse loans that exceed 33% of borrowers’ income; however, this rate has been reduced to 35%.
If this sounds like good news, other rewards are asked in exchange… In particular, a higher personal contribution. In the situation of young borrowers, most often first-time buyers, this contribution is non-existent or below the amount requested. Indeed, it is most often around 10% of the value of the property. This forces most of these borrowers to call on their loved ones to obtain the coveted property.
This situation is delicate, as the real estate market re-emerges after the pandemic. Buyers are more numerous, wishing to change their living environment, and invest in new spaces. This need is part of a dynamic of recovery of activity, but also of a situation where credits remain largely interesting to invest.
Rates that attract buyers
Young borrowers are of course not the only ones to embark on a real estate investment. Other households are changing homes to a larger principal residence, taking advantage of the favorable market. Others invest in a second home, or even in rental investments. These are forms of investment in real estate that amortize these purchases, while allowing to build a valuable real estate heritage. Especially since credit rates still remain at a relatively stable level.
Indeed, the evolution of credit rates depends on the duration of the latter. For investments of 25 years, the longest, but also the most appreciated by young borrowers… The average rates offered by banks continue to fall in September 2021. On the other hand, the lowest rates recorded by brokers increase slightly. The intermediate loan, at 20 years, meanwhile, increases slightly. Finally, the opposite situation is true for 15-year loans. These are loans most often acclaimed by borrowers who have already made real estate acquisitions in the past.
What does the face and typical profile of a young borrower today look like? On average, this is a buyer of about 27 years, who benefits from a monthly income of 3100 €. Mainly men (65%), they make a loan with an average duration of 23 years and 2 months, for a credit of € 154,900. These important purchases are therefore made relatively early, and make it possible to build up a first patrimony. Especially since they mostly turn to a purchase in the old (76.84%) and preferably without work (50%).
For young borrowers, the period is ideal to invest. But faced with the quantity of conditions requested by the banks, many see their file refused… Will the situation evolve in the service of these profiles?
Despite the health crisis, young borrowers have not hesitated to embark on the adventure of real estate acquisition! Barometer of La Centrale de Financement published on July 5, 2021
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