French Heritage at a Record Low: Alerts Issued for Two Consecutive Years

For the second consecutive year, French household wealth declined in 2023, according to a study published on December 11 by INSEE and the Banque de France. This marks a historic shift after eight years of continuous growth, largely due to the drop in real estate prices.
 

Total Net Worth Down 0.9%
At the end of 2023, household net worth stood at 14,567 billion euros, marking a 0.9% decline compared to 2022. This decline, much steeper than in 2022 (-0.1%), is primarily due to a significant 4.7% drop in the value of real estate held by French residents.
The real estate market was hit hard by the interest rate hikes initiated by the European Central Bank (ECB) beginning in 2022. These increases made mortgages more expensive, leading to a drop in demand and, consequently, a decline in prices.
 

Rising Financial Assets Provide Partial Buffer
Despite this decline in real estate values, households saw their financial wealth increase by 8.3% in 2023. This increase is attributed to the appreciation of financial assets, driven by higher interest rates. However, this financial gain was not enough to fully offset the losses in real estate, making 2023 a year marked by a net erosion of household wealth.
 

National Wealth in Decline
The decline in wealth is not limited to households. Businesses and public administrations have also seen their wealth shrink significantly:
• The wealth of non-financial businesses fell by 10%, mainly due to lower land prices and an increase in their financial liabilities.
• Public administrations recorded an even more drastic drop of 27.5%, although they remain in a better position than in 2021 thanks to strong growth observed in 2022.
Overall, national wealth decreased by 4.2% in 2023, the first such decline since 2014.
 

A Still-Tentative Real Estate Recovery in 2024
The year 2024 began with the same trend, as real estate prices continued to fall during the first two quarters. However, prices began to stabilize in the third quarter, according to the Notaires-INSEE index published in late November.
This modest improvement was driven by the ECB’s decision in June to gradually cut interest rates, following a sharp slowdown in inflation. Despite this encouraging sign, buyers remain cautious, and the number of transactions continues to decline, reflecting still-fragile confidence in the market.
 

Persistent Uncertainty for Households and the Economy
While the stabilization of real estate prices and lower interest rates offer hope for a medium-term recovery, the French continue to face a historic erosion of their wealth. The downturn in the real estate market, coupled with investors’ wait-and-see attitude, reflects an economy in transition, where the impacts of monetary policies are being fully felt.
 

For households, as well as for businesses and government agencies, 2024 will be a crucial year for initiating a sustainable recovery from this period of wealth contraction.