Real Estate Market: Calm after several years of rapid development

In March 2022

The coach has put his house up for sale, located in the center of Bordeaux, not far from the charming Santa Eulalia square. The real estateagency assured him that his property would "sell within a month." He is "so nice." Indeed: the house, renovated in a loft style with an art deco spirit, is 86 square meters, has no garden but features a large balcony, two bedrooms, a spacious living room, positive energy efficiency (C), and a southern exposure... The starting price is 420,000 euros, which is 4,850 euros per square meter, a high average for the center of Bordeaux.

In fifteen months

There is still no buyer. The price has been reduced twice: first to 400,000, then to 380,000 euros. "The most alarming thing is that the number of views has dropped since this winter," said Yugo. His misfortune is not an exception. Many owners trying to sell their property find themselves in a difficult position. After several years of growth, the market stalled at the end of last year. "This is more than a slowdown; it's almost a blockage," believes Vincent Deruelle, director of research at the Xerfi agency, which monitors the pulse of the market and has lowered its forecasts for 2023. "In the secondary market, we expect to sell 930,000 homes or apartments this year in France. This is a 17% decrease compared to 2022.

The situation also turned out to be concerning in the new developments.

Sales of new homes in areas with non-systematic division (as opposed to residential complexes) decreased by 31.3% in 2022, according to the construction association FFB, which unites private construction companies. The construction market, weakened by the surge in material costs, is contracting. According to data from the Ministry of Ecological Transition, the number of construction projects started from June 2022 to July 2023 fell by 12.7% compared to the previous twelve months.

How can I explain this stop?

“We were in a supply crisis, and now we are transitioning into a demand crisis,” says Pierre Vital, president of the Federation of Real Estate Builders in New Aquitaine. Buyers want to purchase, but they are hindered by rising interest rates (4% has become the standard level for 20-year loans) and the increased difficulty in accessing credit due to stricter bank requirements. In the first quarter, there is a huge percentage of refusals: 50% of buyers who reserved housing are backing out due to not obtaining a loan. “The production of new mortgage loans has decreased by almost 42% compared to the first half of 2022,” emphasizes Vincent Deruelle.

In his opinion, the resolution of the situation will "partially come from a decrease in prices, but there is a certain delay in time, as sellers have not yet realized the scale of the crisis."

"In such an attractive region as Gironde, prices are rising slowly but are falling very slightly," says Delphine Detri, president of the Gironde Notary Chamber, passionately. "We are returning to the volumes of 2017-2018 after two to three years of increasing transactions."

Moreover, in addition to the fact that money has become more expensive with rising interest rates, real estate market actors explain this decline by new, stricter standards.

The mandatory audit is becoming increasingly detailed compared to the assessment of energy efficiency, as it indicates the need for work and, most importantly, the cost for homes with ratings F or G (the two lowest ratings on the energy expenditure scale), which deters some buyers.

Due to delays in the purchase of first-time homebuyers who are renters, the rental market is also under pressure.

And there is one indicator that does not bode well for the future: the number of building permits issued in France has decreased by almost 20% over the past twelve months. For economic and political reasons, prefects have become much more cautious regarding construction density. "The problem is that less new housing means less social housing, while the needs are enormous. We are creating all the conditions for a more serious housing crisis in the medium term," worries Pierre Vital.