While the second quarter of 2024 showed signs of a return to better fortunes on the real estate market, the absence of a parliamentary majority and government is paralysing buyers, notes the head of the network with 720 agencies.
L’Express: What trends did you observe in the second quarter on the real estate market?
Yann Jéhanno: Until the dissolution of the National Assembly, the market was sending rather favourable signals: interest rates were falling below 4%, restoring purchasing power to buyers, prices were falling, with an average drop of 4.1% at the end of the first half of the year, and bankers were starting to lend again. These factors put some balm on the hearts of buyers and we observed, in our network, a slight recovery in transactions.
We can draw two notable lessons from the first half of the year. First of all, in an inflationary context, houses are less sought after. They represent a significant financial envelope: for purchase, in terms of energy and maintenance. Furthermore, the outskirts of large cities are struggling the most. This is particularly true in Ile-de-France where prices have fallen by more than 8% in six months, compared to only 5.3% for Paris and 4.1% on average at the national level. These areas concentrate a large supply of houses and they are the ones that had recorded the highest demand during Covid.
Did the dissolution contribute to buyers’ wait-and-see attitude?
It is true that the summer was particularly calm! Since the dissolution, everyone has been paralyzed. Each party has presented its measures in terms of real estate: elimination of transfer taxes for first-time buyers, repeal of the energy performance diagnosis (DPE)… This vagueness does not encourage people to commit to a personal project. The necessity market, linked to professional transfers or separations, is still there, but purchases of comfort are drying up. Surprisingly, rental investors remain present despite regular regulatory changes. It must be said that real estate is the only way to build up assets with leverage.
Should we expect further price drops?
During the summer, prices in our network fell again, but not significantly due to a very limited transaction volume. Unsurprisingly, they should continue to fall significantly to bring fluidity to the market. Schematically, the rise in rates has reduced real estate purchasing power by 20 to 25%. Over the last few quarters, buyers have recovered around 10% of this, thanks to cheaper credit, a drop in prices and higher negotiation margins. We do not expect property prices to fall by another 10 to 15%, but rather by 3 to 4%.
Buyers must also understand that the previous situation, with extremely low rates, was abnormal. They must agree to revise their expectations downwards in order to realize their real estate project.
What is the impact of the DPE?
A poor energy label – F or G – results in a triple penalty for the seller. First, when putting the property on the market because it will be positioned at a lower price. In addition, sales times are seven to ten days longer. Finally, negotiations are more substantial when the DPE is not favorable: the discount is 6 to 6.5%, compared to 5% on average.
On the buyers’ side, some of them do not want an energy-intensive property, especially those who are making a rental investment. But those who are buying to live in, with a small budget, are looking for a home with a poor DPE because it is less expensive. We must also keep in mind the reality of the stock: in cities like Paris, 40% of homes are classified F or G.
What are the prospects for the start of the school year?
I am not pessimistic about sales volumes because there are still necessity transactions. In addition, rates are more contained, banks are working harder… The market should continue to hover around 850,000 sales this year. On the other hand, I am much more worried about the fact that more and more French people are struggling to find a roof over their heads: access to social housing, to private rentals and to property ownership is hampered. Proposals have been put on the table by the profession but all the expected reforms are currently suspended.
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