In order to inventory the real estate market in 2022 and measure the temperature at 1Verse In the quarter of 2023, The Address Network conducted an internal survey of its 345 branches. It is not surprising that the conditions for granting loans were and should remain a limiting factor, even if the market remains dynamic, despite the wait-and-see attitude that is now observed on the part of the buyer and seller.
All networking professionals agree that the decline in prices started with current negotiation margins of 5-10%, and even more on lower-energy-performing commodities. Buyers, on their part, in the context of a great decline in their ability to borrow, are increasingly demanding and concerned with the quality, but above all with the price of commodities…
It was the toughest credit conditions at the end of the year that affected real estate activity, particularly through an increase in loan refusals
The l’Adresse cooperative network carried out an internal survey of its 345 members between December 26, 2022 and January 6, 2023 to assess the real estate market in 2022 and give an outlook for 2023. It was affected by the tightening of credit conditions.
Nearly half of respondents (46%) have breached sales agreements due to loan refusals often associated with rate of wear, with up to a third of sales at some dealerships not being completed, resulting in these items being returned to the market, often at a lower price. .. In the fourth quarter of 2022, approximately half of our branches had to deal with loan denials that resulted in the current sale being terminated. In many agencies this is about 1 transaction out of 10… Some agencies also note that the phenomenon seems to be increasing at the beginning of the year, with up to 30% of sales sometimes failing due to refusal to stand by”, Analyzes Brice Cardi, President of Address Network.
In addition, it is also currently happening that buyers often cancel their offers before signing the settlement, for fear of later rejection of the loan, after a negative opinion from the bank on their prior application. Financing…
Increase negotiation margins which are already reflected in price reductions
At the end of the year, the market was wait-and-see, but now it’s on the sellers’ and buyers’ side, according to 44% of title agencies. 50% still believe that a wait-and-see attitude is stronger on the part of buyers versus only 6% on the part of sellers.
In this context, and due to the decline in the ability of buyers to borrow due to the increase in credit rates, 71% of the branch managers in the address network noticed an increase in the margins for negotiating sales prices in proportions that vary according to the goods and according to the seniority of their offering in the market: In general, our property advisors now see negotiation margins of 3-7% depending on the area and property, with sellers and buyers often unwilling to raise their bid difficult to give in, then give up and then turn towards other properties… For properties that require a lot of Labor, noted negotiation margins are often 10-15% of the price, due to the increase in the cost of materials, but again it depends on the property! Cyril Parmentier, Director of Address Network Development.
Unsurprisingly, for 1Verse In the 2023 quarter, the majority of agencies (68%) expect prices to fall, while 30% believe prices will remain stagnant. Only 2% think prices can go up further.
In terms of expected price reductions, the agencies expect reductions of 5% in the first quarter of 2023 alone, and then more for the remainder of the year (10% in total) with variations by property and region… while specifying that “core” properties are targeted In its markets, such as high-quality homes that don’t require a lot of work and under €500,000, it won’t suffer a downturn because supply is still limited and demand is strong.
” The evolution of prices is of course dependent on supply and demand, but we also have a role to play as real estate professionals: it is up to us to get sellers to listen to why by showing them that they are not interested in waiting for prices not to go up too much, that prices not go down too much, the longer the property stays in the market. market, the greater the probability of its depreciation…Brice Cardi explains.
Energy quality in real estate, of increasing importance to buyers, with an impact on sellers
Since January 2023, under climate law, some G properties, which are the most energy-intensive, can no longer be rented unless major energy renovations are carried out. But, in the current energy context, the performance of real estate matters to investors and owners of their prime residence. Not without consequences for the real estate market: a quarter of title agencies (26%) noted an increase in the sale of F or G properties at the end of the year.
Depending on agencies and regions, the proportion of properties currently for sale in F or G ranges from 15 to 60% of properties, with an average of 30%. Many professionals realize that this can be a drag on sales. In fact, 86% of agencies have found that buyers are more interested in the urgent provision of properties they visit or buy, which is a consistent number compared to summer 2022.
Outlook for 2023: Slow but still dynamic market
According to nearly 20% of agencies, the market must remain dynamic in this 1Verse Quarter 2023. However, for the majority of members, the market is currently experiencing a slowdown (75% of responses) after particularly dynamic years, more than a halt (response provided by only 9% of agencies).
” The real estate market is currently affected by a wait-and-see attitude and terms of credit, but remains supported by incompressible or forced transactions and “cash” purchases, without credit, which in certain areas are more numerous than one might think, particularly of course within a higher age group. Brice Cardi analyzes.
Among the topics of interest to buyers for 2023 as noted by the Title Network agencies is an increase in credit ratings (81% of responses) followed by very high real estate prices (strong response increase: 49% of responses) versus 27% over the summer). Next come wear and tear rates (45% of responses, constant number), then headline inflation (40.5% compared to 25% over the summer) and finally early childhood development, for 27% of responses, compared to 12.5% of responses 6 months ago, Twice that number!
Advice for those who have a real estate project in 2023
In this context of a market downturn where the wait-and-see attitude is correct and where sellers and buyers hold their ground, Price Cardi, Head of Title, advises those with a real estate project:
- On the buyer side, it is advisable to anticipate seeking financing and preferably going through a broker to secure it. It is necessary to estimate its borrowing capacity as early as possible from the date of its research and not to wait too long to build up its project, because prices may continue to rise in the coming months. ” Lending rates will continue to rise, almost certainly reaching close to 4% by the end of the year, leading to a decrease in the borrowing capacity of buyers. A price increase of 1 point, for a monthly payment of €1,500 over 20 years, would mean €30,000 less than being able to borrow to finance a project of around €300,000, or 10% of its value! And mechanically speaking, this would require buyers to pay more down payment to compensate for this decrease in their ability to borrow, and thus buy enough space to live in… So it’s best not to wait too long Brice Cardi explains.
Another tip: negotiate the purchase price carefully, especially if there is a lot of work to be done, if the DPE value is F or G, or for properties that have been sold for more than two months.
- On the seller’s side, it is essential to set the right selling price from the beginning of marketing, because selling your property at too high a price carries the risk of making a sale at the end at a lower price than initially expected. “Sellers are now concerned to respect the estimates of the specialists we are, in order to sell as soon as possible and prevent their property from remaining on the market for a long time at the risk of a large discount. Selling immediately at the right price means stopping the price drop” Brice Cardi concludes.
Another tip: Consider your energy renovation business before you sell. And don’t wait too long to sell because from April an energy audit will be mandatory for Class F and G rated properties, with the risk of discouraging buyers given recommended and measured work to make a home less energy efficient.