Rising interest rates in 2023: should you buy or rent?

In the arena of financial choices, real estate always takes pride of place, and 2023 is no exception. As interest rates soar, the question arises: should you buy or rent in 2023? Faced with this crucial issue, many people find themselves caught between the lure of home ownership and the advantages of renting. What are the factors to consider when making a decision? What are the financial implications and trends to consider? To help you navigate this real estate maze, Paradise Immobilier, real estate agency in Collioure takes you to the heart of this controversy by analyzing the issues involved in buying versus renting.

Buy or rent: the real estate dilemma in 2023

In 2023, the question of buying versus leasing will be of unprecedented relevance. Fluctuations in the real estate market and the impact of the global economic situation make this dilemma a crucial decision for many players in the sector. With borrowing rates and interest rates rising significantly, it's essential to examine recent changes in the real estate market, as well as the influence of the overall economic situation on the outlook for buying and renting.

The real estate market in 2023: new trends and realities

In 2023, the real estate market will undergo significant changes, influenced by various economic and social factors. According to ECB data (1), interest rates on mortgages, which had been at historically low levels in recent years, have risen by around 1.5%, equivalent to an average rate of 3.50% over a 20-year term. This increase has a direct impact on buying and renting decisions, as it means higher rents for potential buyers.

What's more, according to the Fédération Nationale de l'Immobilier (FNAIM) forecasts for December 2023, property sales are set to fall by 15% (2) compared with 2022, reflecting buyers' caution in the face of economic instability. Property prices, meanwhile, are expected to fall by 20% (3) in 2023 due to rising interest rates.

Impact of the global economy on the real estate market in 2023

The global economic situation plays a crucial role in real estate purchase and rental decisions. In times of economic stability and growth, many people feel confident about investing in real estate. Real estate is perceived as a solid safe-haven investment that offers opportunities for long-term capital gains.

However, in times of economic uncertainty, leasing can become a more attractive option. When the economic outlook is uncertain, individuals may prefer to maintain their financial flexibility by opting for rental rather than committing to a long-term property purchase. This makes it easier for them to adapt their situation to changing economic conditions.

Advantages and disadvantages of buying real estate in 2023

In the complex world of real estate, buying a property is a major decision. In 2023, the opportunities and challenges of buying real estate are significant, making it all the more important to weigh up the pros and cons.

4 reasons to buy real estate

Buying a property offers several advantages that attract many potential buyers:

• Stability: owning your own house or apartment offers long-term residential security, without having to depend on fluctuations in the rental market.

• Long-term investment: buying real estate offers the opportunity to build wealth and potentially benefit from capital gains on resale.

• Freedom to modify: this freedom allows homeowners to adapt their home to their needs and preferences, without asking the owner's permission.

• Financial assistance: there are many forms of assistance available to support property purchases. Among them, the eco-PTZ allows buyers to obtain a zero-interest loan to finance energy renovation work, thereby helping to reduce energy costs and protect the environment. MaPrimeRénov' also offers subsidies for renovation work, reducing the overall cost of property acquisition.

The downsides of buying real estate: 3 main disadvantages to consider in 2023

Despite its many advantages, there are also a number of disadvantages to consider when buying a property:

• High initial costs: notary fees, transfer taxes and the financing costs associated with obtaining a mortgage can add considerably to the total cost of acquisition.

• Ongoing maintenance: owners are responsible for the regular upkeep of their property, which can lead to unforeseen additional expenses.

• Market risks: market fluctuations, interest rate changes and economic shifts can affect the resale value of a property, introducing potential uncertainty into the return on investment.

Will interest rates fall in 2023?

The question on the minds of many in 2023 is whether interest rates will fall. Unfortunately, predicting future interest rates with any certainty is not that simple. However, by examining recent trends and economic indicators, we can formulate a few hypotheses.

According to recent analyses, interest rates are unlikely to fall in 2023. On the contrary, the plan is to gradually increase them. According to forecasts by Groupe BPCE (4), interest rates on mortgages are set to rise in 2023, reaching an average of 3.7% by 2024.

This increase is mainly due to several economic factors. On the one hand, the post-pandemic economic recovery, with its increased demand for mortgages, has put upward pressure on rates. On the other hand, central banks have progressively reduced their monetary support measures, leading to a rise in rates on financial markets.

Although the current trend is upwards, it is important to remain attentive to economic developments and central bank decisions.

Advantages and disadvantages of renting a property in 2023

In this dynamic real estate market of 2023, property rental remains an attractive option for many people. However, it also comes with certain disadvantages, such as the absence of property capital, restrictions imposed by landlords and the inherent instability of tenant status.

3 reasons to rent a property

Renting offers several advantages that attract many potential tenants:

• Flexibility: tenants can choose the duration of their lease according to their needs, making it easier for them to adapt to personal or professional changes.

• Initial costs: by opting to rent, tenants can benefit from a better return on their initial capital. In fact, initial costs are generally lower than when buying a property. Tenants avoid the expenses associated with buying a property, such as notary fees, transfer taxes and financing charges.

• No maintenance costs: tenants are generally responsible for routine maintenance costs, while larger costs such as structural repairs are borne by the landlord. This gives tenants financial peace of mind and avoids unexpected expenses.

The limits of property rental in 2023

Here are some of the disadvantages of renting a property:

• No real estate capital: unlike buying a property, where mortgage payments build up real estate capital, tenants do not benefit from this long-term financial advantage.

• Owner-imposed restrictions: these may include strict rules on pets, structural modifications or subletting. Tenants may therefore feel limited in their ability to personalize their home to suit their preferences.

• Instability: tenants are subject to fluctuations in the rental market, which means that rent increases can occur at any time. This uncertainty can make long-term financial planning difficult.

Factors to consider when choosing between buying and leasing in 2023

Have you ever dreamed of owning your own home, or do you prefer the flexibility of renting? What about your current financial situation and future plans? And above all, how can ever-changing real estate market trends influence your decision? These questions are essential when choosing between buying and leasing.

Buying and renting: what are the financial factors?

A realistic assessment of your current and future financial situation is essential if you are to make the right decision for you. Financial factors such as your income, your ability to save, your credit situation and your comfort level with debt will help you determine whether you have the necessary financial resources to purchase a property, including the initial deposit, notary fees and monthly mortgage payments.

Factors related to living conditions

Job stability, family needs and future plans must also be taken into account. If you're planning frequent career changes or looking to expand your family, renting can offer greater flexibility. On the other hand, if you're looking for long-term stability, buying can offer you a foothold in a community and the opportunity to customize your home to suit your needs.

Navigating market trends: key factors

Keeping a close eye on real estate trends and prices is essential when considering the purchase or rental of a property. Fluctuating property prices can affect the profitability of a real estate investment over the long term, whereas by analyzing current trends, you'll have a clear view of the short- and long-term outlook.

What are the best situations for buying real estate?

• Scenario 1: You have solid job stability and long-term income prospects. You also have substantial savings and good credit. In this case, buying a property may be preferable.
• Scenario 2: You're a young family with small children. You're looking to establish solid roots and provide a stable home for your children. With a solid financial situation, a stable job and a long-term vision, buying a property in 2023 would be preferable.

What are the different types of property rental?

• Scenario 1: you're an ambitious young professional who's recently landed a job in a dynamic city where you want to develop your career. However, you're not sure you're going to stay in this city for the long term. In this case, renting a property in 2023 is an ideal option. By opting to rent, you'll benefit from greater geographical flexibility and be able to devote your financial resources to other projects.
• Scenario 2: You're a young, recently married couple with a passion for travel and a dynamic business sector. You don't want to be tied to a specific location for the long term, and prefer the flexibility offered by rental. By choosing to rent a property in 2023, you can take advantage of the possibility of moving easily according to professional or personal opportunities.

In short, the dilemma of whether to buy or rent a property in 2023 remains a complex and personal one. There is no universal solution, but rather a multitude of individual scenarios to consider. Whether you want to become a homeowner to build a solid estate, or take advantage of the flexibility offered by renting, your choice must be carefully considered and adapted to your situation.

Paradise Immobilier is your trusted partner in your quest for the real estate of your dreams.

Sources :

1. ECB
2. Les Echos - Real estate sales down 15% (FNAIM) / Journal de l'économie - Real estate sales down 15% (FNAIM)
3. Capital - Real estate prices down 20% in France
4. BCPE - Estimated rate increase 2024