2023-04-16 09:08:04
Falling prices, rising rates, buyers who are becoming demanding, owners who are sticking to their guns, banks who are no longer lending… All that is missing is the appearance of a new variant of Covid and a departure from Kylian Mbappé of PSG to plunge the French capital and the real estate market (as a whole) into a deep crisis.
So the question is not so much whether Kylian will end up leaving for Real Madrid but whether a Parisian owner can still hope for a record offer for his apartment? What should be done today to obtain the offer that cannot be refused?
warning signs
Not a day goes by without the real estate market being announced to be in crisis. And that’s okay. With a decline in average prices in old buildings of 1.6% in 1 year in Paris (Chambre des Notaires de Paris at the end of January), the figures have indeed gone into the red. The same is true for new homes for which developers are recording a decline in reservations of nearly 40% at the start of 2023.
But how did we arrive at such numbers? How can such a turnaround be explained? Everything was going so well not so long ago. Let’s not forget that the average price of houses had literally been catapulted by more than 5% post-lockdown (including in Creuse and Lozère).
The banks, that big bad wolf
The causes of this crisis are obviously “financial”. In pole position, let’s break in an already wide open door and talk about rates. After having doubled over the last year to exceed 3%, experts predict an overrun of 4% this summer. When the central banks raise their rates, the buyer sees his envelope amputated and writes off the room of the youngest.
At the same time as interest rates, the conditions for granting loans have tightened considerably in recent months. Last February, loans allocated to housing were only 15 billion, i.e. a drop of 40% compared to February 2022. With a wear rate at its lowest and a debt ratio at 35% not to be not exceed for households, obtaining a mortgage was almost a feat at the end of 2022.
Yes, but now, you can’t always load the same mule. This crisis does not find its source (only) in the banks.
Energy renovations in the shadow of financing conditions
Come, vidi, vici. This could have been the motto of the Energy Performance Diagnosis. If we no longer present the DPE, it is clear that its recent evolution has had an impact as sudden as it is considerable on the morals and real estate projects of households.
Historically absent from the long list of search criteria for buyers, it is now on the podium.
If some (too few) buyers find in a failing DPE a means of pressure to negotiate the price downwards, the majority see it as a pestiferous to avoid absolutely. For many months now, thermal colanders have been languishing on broadcast sites. And for good reason. A gray area persists on these famous thermal colanders. What work should be done? What would the cost be? How can you be sure of obtaining a suitable ECD with these works?
The implementation of the energy audit should eventually make it possible to answer these questions, but it only came into force at the beginning of April and currently only concerns individual houses or single-ownership buildings.
What about sellers?
On the seller’s side, the positioning is different but the result is the same and without appeal: what is the point of investing in a property that you want to sell… without knowing if the work carried out will allow it to be sold? ?
Thus, these thermal sieves find themselves stuck between a rock and a hard place, between sellers not motivated by incurring costs for a property they wish to part with, and buyers who, not necessarily familiar with the joys of work, prefer to focus on “thermal casseroles”.
And the taxes in all this slump?
Finally, among the last taboo subjects, let’s go back for a moment to the disappearance of the housing tax in 2023. Good news, you might say. It’s true. But faced with the inflationary shock, many municipalities have decided to increase the property tax. And Paris is no exception with an expected increase of 52%. A clever game of communicating vessels.
If on the tenant side, the disappearance of the housing tax is good news, on the owner side, the increase in the property tax is not in the best taste.
A split market
In the face of this torrent of bad news (sorry) a split in the real estate market is emerging. A distinction is now made between “perfect” goods and others.
The perfect property, the “Blond”, which has no faults, high floor, incredible view, southern exposure, small exterior (or large for that matter), already renovated, satisfactory ECD… continues to surf an ever higher price wave impressive.
Our latest example concerns a two-room apartment located on avenue Parmentier in the 10th arrondissement. This little gem nestled on the 5th floor with lift, its balcony and its view of the Sacré Coeur, its DPE D, had been valued at an average of €490,000 by all the (reliable) online valuation sites. Displayed at an incredible price of €550,000, it will nevertheless receive five offers at the price in less than 24 hours. Conversely, there are many properties that, plagued by more marked details (northern exposure, rather low ceiling height, courtyard view, etc.), stagnate in a market that wants to be capricious and chain price reductions repeatedly in order to find their new owner.
What lesson can we draw from this observation? Should sellers put their project aside?
NO ! The market is moving. Demand is changing, supply must adapt. Today, the wishes of buyers are taking shape. If the majority claim that they are not afraid of the work, the reality is quite different and the facts are there. To start at ever higher prices and ride the wave of yield, real estate must be close to the gods. A good DPE classification, clean walls, glossy parquet, a state-of-the-art kitchen, a renovated bathroom… these are the minimum expected to integrate the first class.
A return on investment
By putting themselves in tune, the owners give themselves a chance to sell quickly while carrying out a very nice transaction. By carrying out quality work prior to the sale, sellers replace property dealers and make a considerable margin.
Yes, but now, theory and practice do not mix. And despite the good resolutions aimed at costing the work, reality catches up with sellers who finally opt for “easy” and more traditional marketing.
In conclusion
No need to be alarmist about this situation. Like any market, real estate sometimes needs to breathe before resuming its progress. But it is not forbidden to undergo this situation. You have to adapt. On the other hand, we are much less optimistic about Kylian’s future at PSG…
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