Real Estate Report 1st half (Laforêt): A resilient market but in the process of landing

Laforêt Immobilier presents its results for the 1st quarter and Yann Jéhanno, its president, takes stock of a certain number of uncertainties which will weigh on the 2nd half.

After a historic 2021, 2022 looks like a resilient year. With the need for housing asserting itself as a constant value, the trend is moving towards a return to normal even if, locally, the market appears to be fragmented. The stone maintains the confidence of households, in a context of inflation and economic uncertainties, thanks to still favorable borrowing conditions. Especially since new real estate remains constrained by the lack of housing starts, the rise in construction costs and the shortage of raw materials. Despite a high volume of transactions in the 1st half, driven by the “home/region” duo.

Purchase intentions still on the rise

During the 1is half of 2022, the number of new buyers is still increasing, although the increase is less spectacular than in the last 3 record years. Nationally, purchase intentions increased by 2% compared to 1is half of 2021, proof that real estate remains at the heart of French people’s life plans. The progression is identical in regions. And, while Île-de-France only shows +1%, Paris is picking up (+7%). The French are clearly renewing their confidence in stone, a safe haven that they continue to favor for housing, building up assets or generating additional income. Neither the war at the gates of Europe nor the presidential or legislative elections seem to disturb buyers. The latter, on the other hand, are becoming more and more picky. The situation of the property and its intrinsic qualities are carefully studied by buyers who prefer to bet on sure values. As far as distribution is concerned, it is the houses, once again, which are particularly benefiting from this upward trend, with +6% of requests recorded compared to the 1st half of 2021 against “only” 1.5% for the apartments.

An offer that is struggling to recover in a market under pressure

On the sales side, the scarcity of goods puts the market under pressure. Supply continues to decline nationally (-2%) and fails to recover to meet the constant increase in demand observed in recent years. Some sales projects were also thwarted during the epidemic rebound at the start of the year.

More nuanced in Paris (-1%), the decline is very strong in the regions (-4%). Only Île-de-France is escaping the trend, posting a slight rebuilding of its inventories (+6%), which is based almost entirely on apartments and is mainly concentrated in the inner suburbs. The stigmatization of housing F and G, supported by the legislator who will soon ban their rental, ended up bearing fruit: the sale of these properties increased by 9% compared to the 1is semester of 2021. Some owners, who do not wish to undertake sometimes substantial renovation work, are hastening to put their homes up for sale.

Volume of transactions: second-time buyers take control

Transactions are landing (-2.7% nationally). However, we observe a more marked decline on the 1is quarter, linked to the pandemic recovery in January, followed by a catch-up in the 2e trimester. Transactions thus stabilized at the end of the half-year at a high level. The capital is taking full advantage of this rebound (+9%), after two complicated years. Departures to the regions ultimately proved to be punctual for the most part and the Parisians are back. In Île-de-France, the trend is downward, with transactions down 4% compared to the same period last year. The inner suburbs, in particular, are marking time in favor of the outer suburbs, which offer more attractive prices and a wider range of individual houses. However, this postponement was not enough to absorb the break that took place in the first crown. The regions, for their part, are resisting with transactions falling significantly by 2.8%, without there being yet any impact on the price increase which continues.

Moreover, while first-time buyers represented more than half of buyers on the old property market in recent years, they are no longer at the 1is half of 2022 than 33%. The continuous rise in prices over the past two years has made access to credit more complicated. We must produce more proof of solvency, but also more substantial contributions. This situation favors second-time buyers, who take advantage of the sale of their home to finance the next one. They currently represent 40% of transactions and are motivated by the acquisition of larger homes or those with an exterior.

Investors are themselves at the origin of 21% of transactions, in a context of uncertainty about pensions. Faced with highly volatile stock markets and alternative currencies, the French are turning to rental investment, which remains one of their favorite investments. Second homes are enjoying some success, representing 6% of transactions. An interest that already existed before the health crisis, but which has since grown with the generalization of telework.

Sharply rising prices: regions at the top of the rankings

Average prices per m² are up sharply nationally (+5.8%), to €3,456/m², but especially in the regions (+8%), to €2,494/m²: unheard of! In the context of extreme scarcity of supply, the traditional mechanisms of the market economy come into full play: a number of buyers greater than the volume of goods to be sold mechanically leads to an increase in prices. The latter are also driven by houses (+8.5%), while they progress for apartments “only” by 4.3%. After a steady decline for several months in the capital (-1.5%), which should however be compared with the -1.7% of 1is quarter of 2022, prices are recovering, with an average price per m² of €10,352/m².

With the exception of 4 arrondissements (13th, 18th, 19th and 20th), all the others have an average price per m² of more than €10,000/m2. With the return of buyers to the capital, a rebound cannot be ruled out. Finally, Île-de-France saw its prices increase by 3.2%, to €4,544/m².

In detail, medium-sized cities continue to benefit from the recovery and show a clear increase. This strong dynamic illustrates the desire for space, nature and the coast of the French, like Lorient (56), which saw its prices increase by 6.5%, Hyères (83) by 8.3% or even Auxerre (89) by 6.7%. The energy label, which no longer plays an exclusively informative role, now also has an impact on prices. Buyers are indeed more careful about the budget they are willing to allocate to renovation work. So they are particularly attentive to technical issues: heating, insulation, which can quickly amount to tens of thousands of euros.

Overall, these high price levels are unfavorable to the most modest incomes, as well as to working people under the age of 35, who often have no other choice to buy than to reduce the desired surface area or to move away from the locality they initially coveted. Faced with the increase in fuel, travel and home-work journeys weigh significantly on the rest of life and also modify projects.

The return to negotiations imposes new rules

In a market context that is slackening but which remains very unbalanced with demand exceeding supply, lead times are, everywhere in France, less than 3 months (82 days in the regions). However, they continued to lengthen in Paris, to reach 78 days against 68 days in Île-de-France. We thus observe a first point of inflection: urgency no longer seems to prevail in purchasing decisions. This is reflected in particular by the return to negotiations, almost everywhere in France. The difference between the sale price and the purchase price is thus established nationally at 4.70% on average, i.e. 0.35 points more than in the 1st half of 2021. It is 4.95 % in the regions (+0.25 point), 3.50% in Paris (+0.45 point) and 3.55% in Île-de-France (+0.60 point). In a bull market, buyers negotiate the slightest default. They also have more requirements with regard to geographical location, orientation, brightness, insulation or the equipment present in the accommodation. Sellers who are not ready to hear these demands will have to get used to it, however, because negotiations seem to be taking hold.

Uncertainties weigh on the second half of 2022

“Despite un beginning of the year with difficulty, the 1is semester ends strong with prices still rising and a large volume of transactions, even if the landing seems to have begun“, concludes Yann Jehanno, president of the Laforêt network. A number of uncertainties weigh on the second half, the content of which will depend on several parameters. First, the appetite for real estate. If the stone remains a safe haven, the French are not ready, however, to sacrifice everything to it. Faced with rising energy prices, will the thirst for space and nature be the strongest? We are already seeing a return of families to the city center apartment market. Rising prices in rural and peri-urban areas combined with rising energy prices could weigh on demand.

Funding is the second point of attention. Faced with ever more restrictive loan granting conditions and interest rates which are rising and could exceed 2% or even reach 3%, the French are suffering the double penalty. Some will have no choice but to postpone their acquisition project. Bankers and the State must now find solutions to provide solvency for the most exposed households. However, this subject has been surprisingly forgotten in the presidential and legislative debates. The absence of a full minister dedicated to housing in the new government is not more reassuring.

Another question: the role that the new energy regulations will play on sales. A timetable that puts landlords under pressure, insufficient public aid, rising material prices, undersized renovation sector… The ambition of the legislator around the energy renovation of thermal sieves comes up against many obstacles and seems, in its deadlines, totally unrealistic. For lack of sufficient means, the energy transition risks aggravating the real estate shortage.