The cooperative network L’Adresse conducted an internal survey between its 345 agencies between December 3 and 11, 2023, as every 6 months, to evaluate the real estate market for 2023 and provide an outlook for 2024.
A slowdown in the market in 2023, mainly due to the wait-and-see attitude of both buyers and sellers !
Unsurprisingly, according to most members, the market is currently experiencing a slowdown. 78% of estate agents believe the market will slow in 2023 (compared to 71% at the end of 1ahem semester), where 16% believe it has stalled, a number that has doubled since this summer. However, it remained dynamic for 7% of agencies (compared to 19% at the end of 1ahem semester).
“The fact that rates exceeded 4% this summer highlighted the market slowdown we have seen since the start of 2023 and further reinforced a wait-and-see approach by buyers without sellers accepting further discounts. Big cities, where prices are the highest, were penalized the most, while in some medium-sized cities the market held up relatively well and still allowed a rotation of goods. The market, which should have reached almost 900,000 transactions, was finally sustained, on the one hand thanks to activity in the most accessible regions and in tourist and seaside areas, on the other hand thanks to cash and due to limited transactions such as inheritance, divorces, etc.”, Brice Cardi, president of Address Network, analyzes.
The market still remained marked by a wait-and-see attitude in 2023. If a wait-and-see attitude began on the part of buyers at the end of 2022, the refusal of sellers to lower prices also led to a wait-and-see attitude on their side. According to 48% of agencies, the wait-and-see attitude was as strong on the sell side as on the buy side in 2023, but many still think it remains stronger on the buy side, and only 4% think sellers are waiting the most.
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Continuation of negotiation attempts by buyers, with strong differences depending on the region… but above all depending on the property!
2023 was also marked by an acceleration in price declines, which according to statistics are still milder than on the spot: 92% of L’Adresse agencies saw an increase in negotiation margins in 2023 compared to 71% at the end of 2022. Logical strengthening in the context of rising credit rates by 2 points in one year with the impact of a drop in borrowing capacity of more than 15% in just 12 months.
At l’Adresse agencies, negotiation margins range from 5% of the displayed price to more than 15% for houses that need work or for sale for several months…
“ The negotiation margin depends a lot on the initial estimate and its acceptance by the seller. If the price displayed at the beginning is correct, with an exclusive mandate, for a product well positioned and without work, the negotiation is weak : approximately 2 to 3% of displayed price. But for overvalued real estate, of lower quality and for a long time on sale on all advertising sites, some buyers do not hesitate to try to reduce the price very significantly, up to 20%. ! It is then up to us to make the seller understand that it is justified… »explains Brice Cardi.
The impact of tightening the conditions for the provision of loans in 2023
Not surprisingly, L’Adresse agencies have been affected by the tightening of credit conditions this year. More than half of respondents (52%) have had at least one purchase contract breached due to a loan rejection, although fewer files have been affected since this summer.…
“In the agencies that had rejections, it involved less than 5% of listings, or one in 20 sales. ? Because starting this year in the L’Adresse network, all files of potential buyers are pre-verified by a broker, unless they already have an up-to-date financing plan from their bank. In any case, in the context of a sharp rise in rates, the borrowing capacity of potential buyers is systematically checked before the compromise is signed, which reduces the risk that the sale will be canceled…”, analyzed by Brice Cardi.
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Energy quality of goods, market adjustment variable?
From January 2023, under the Climate Act, some G properties, the most energy-intensive, cannot be rented out unless major energy renovations are carried out, and all G properties will follow in 2025, encouraging investors to sell to them. In connection with rising energy prices, buyers of their main residence are also paying more attention to the energy quality of real estate. Not without consequences on the real estate market: 20% of L’Adresse agencies saw an increase in F or G real estate offers in 2.Thursday half of 2023. Depending on the agencies and regions, the share of currently sold F or G properties reaches up to 80% of properties, on average 20%. Many experts agree that this can be a barrier to sales or a reason to haggle over price, or both. 90% of agencies found that buyers were more attentive to the DPE of properties they visited or purchased in 2023.
Houses for which an energy audit is mandatory from 1ahem April 2023, are affected even more.
Outlook for 2024: falling prices
It is no surprise that for 1ahem half of 2024, three-quarters of agencies (75%) expect prices to fall (+6 points per year), while 25% think prices will stagnate. No agency expects price increases anymore!
As for price developments in 2024, Brice Cardi also expects the decline to continue in the first half of the year, but could end before the end of the year, in the event of a reduction in credit rates and a possible market recovery.
“ In the first half of 2024, the decline could reach 5%, as sellers now realize the need to adjust their price to the buyers’ budget if they want to sell ! Some owners who were originally “no don’t rush », they have put their property up for sale for more than a year, they have no choice but to lower the price ! However, one thing is certain : ownership “ main goal » in their market, such as quality homes priced below €500,000, will not suffer a downturn as supply remains tight and demand strong. And if rates drop slightly in 2024, some buyers will come back!” explains Brice Cardi.
Meanwhile, according to agencies of the L’Adresse network, the main problem for buyers at the end of the year remains the increase in rates (29% of responses), followed by too high property prices (22% of responses , + 2 points compared to summer 2023) and the fear of not being able to get credit (19% of responses + 2 points as well). DPE remains an issue, up 1 point (11%), as does under-contribution (10% of responses, +5 points)… while inflation and attrition rates are no longer an issue (7% and 0.4% of responses, -5 points ).
Advice for those who have a real estate project in 2024
In this context of a market downturn, where a wait-and-see attitude is called for, while opportunities abound, especially for buyers, Brice Cardi advises those with a real estate project in 2024:
- Double check their funding with your bank but also with the broker to get the banks to compete as some are back on the market with more attractive rates which can affect borrowing capacity by a few thousand euros and make a difference !
- Use your verified financing plan as negotiating leverage: assert the fact of financeability, but also the amount of verified financing above which no offer can be made.
- For high rates, don’t look at the total cost of the loan, but rather estimate the amount of interest that will be repaid over 10 years, which is the average length of time the loan will be held before likely resale.
- Buy a property with work and potentially a DPE of F or G to take advantage of a price discount of up to 22%, but also a zero interest loan that can now reach 50% of the property, in eligible and means tested areas.
- Don’t wait to buy, even in the context of high rates, as this will allow you to start repaying the equity as soon as possible, instead of paying rent, with the option of renegotiating your credit rate later when rates fall again.
- Determine the correct selling price once the property is listed for sale, as listing a property for sale at too high a price is risky in that it will end up selling for less than the price expected at the outset.
- Don’t hesitate to sell your property before prices drop, which could increase in early 2024
- Be aware that the prices in 2024 will not be the same as in 2022.
- Do the math that a cheaper sale means a cheaper purchase of another property, with lower costs associated with the purchase, such as notary fees.
- Before selling the property, do all the diagnostics well and possibly do the minimum work so that you are not in F and limit the discount on the price of your property.
“ Sellers these days are keen to respect the valuations of the professionals that we are, to sell as quickly as possible and to avoid letting their property sit on the market for too long at the risk of a significant discount. Selling immediately at the right price means stopping prices from falling “, concludes Brice Cardi.