Real estate: hope is reborn with spring

Is the real estate market seeing the light now that financing has almost returned to normal?

For Cécile Roquelaure: “2023 will have been a unique year in many respects, but above all it will have engaged potential buyers when they hoped to take advantage of what they considered to be the last window of opportunity to buy. It is clear that at the start of 2024, aspiring buyers are better informed and probably more lucid about market conditions. Their profile, more robust in terms of income and share of contribution, is an asset for the recovery of the market in the weeks to come because they constitute our breeding ground for the spring of real estate: 9 out of 10 are still there. research stage! A start of recovery driven by much more favorable credit conditions. »

At the dawn of real estate spring, the broker Empruntis is wondering about the impact of the good news that has occurred on the financing side for several weeks already: are there more project leaders? How do they see their project? Is the real estate market seeing the light now that financing has almost returned to normal?

More favorable conditions

The year 2024 has started under better auspices... And it's about time!

A major crisis in the financing supply, the first signs of which were visible in the spring of 2022, put pressure on the real estate market throughout 2023. But in December, we found an almost complete financing supply. and we even reach a ceiling in terms of credit rates: 4,35% over 20 years. A rate that we have not seen since 2011/2012. This rapid and strong increase has reduced the purchasing power of households by more than 1⁄4. Without being offset by a very limited drop in prices... This is due to the shortage of supply which has crystallized demand for a lower volume of goods. We know the rest of the story: transactions down 25%.

From September, however, conditions improved with the restoration of margins for the banks. This favored the return over the last quarter of the brands which had stopped the sale of real estate loans or reduced their size. With the fall in the cost of money, a 10-year OAT below 3%, the normalization of the usury rate situation and the return of competition, the decline in rates began at the end of December.

For Cécile Roquelaure, Director of Studies and Communications of the broker: “After 2 months of downward movement, we are today at an average rate of 4%, with probably a first level. In fact, at the start of the month, more than half of the banks are stabilizing their rates. »

Despite the persistence of certain conditions imposed by the HCSF which may slow down the recovery, we can today be pleased to find favorable financing conditions.

Favorable financing conditions are unfortunately not enough to resolve all market dysfunctions. The latter remains sluggish and wait-and-see, with property prices remaining too high compared to household income. Recovery is therefore possible but will still have to wait...

The market is shivering but not recovering (yet)

Of course, comparing yourself with the first 2 months of 2023 can cause despair. The number of new real estate acquisition project leaders remains 33% lower in January and 26% lower in February 2024 compared to the same months of 2023 (vs methodology at the end of the press release). However, we must not forget:

• an unfavorable element for 2024: for 18 months now, households have understood that borrowing was difficult and expensive, too expensive...
• a favorable element for 2023: the average rates over 20 years were 2,65% and project leaders still believed in it (their volume had only fallen by 10% compared to January 2022, although it was extremely buoyant).

But the first factual signals of recovery are there:

• the drop in the number of new project leaders is less significant in February than in January: minus 7 points
• If February had had 31 days like January, the number of new project leaders would have increased by 1% for the first time in 1 year. A weak signal of hope being reborn among project leaders.
• the number of new project leaders in January as in February is 20% higher than the monthly average for the last 6 months of 2023.

For Cécile Roquelaure: “It will have taken 12 months for the market to react to the rate rise, it will probably take less for the good news to have an impact but it is still reasonable to imagine that we will need at least half a year. »

However, there remain questions, encouraging a wait-and-see attitude among project leaders regardless of their status:

• Some players are announcing rates of 3% at the end of the year: conditions should continue to improve but how can we count on such a drop when it is impossible to know the credit rates for the following month, and even less to have certainties about the macroeconomic situation or the policy of the ECB (very linked to that of the FED). Moreover, the latest expectations predict a reduction in Central Bank rates in June only...
• Others are announcing the continuation of the drop in prices: in 2023 it has been a long time coming and given the continued contraction in supply in new construction, nothing is less certain. At least it seems difficult to imagine a generalized decline. Properties meeting the requirements of buyers, who are all the less accommodating as they pay "dearly" for their credit, will probably not be discounted or only slightly, because they will concentrate demand. A phenomenon that we experienced at the end of the health crisis for properties that offered a quality environment, an exterior...

Wait or act, always a delicate question

This is a recurring, even permanent, question that is always easier to answer in hindsight. For project leaders who do not tick all the boxes of the banks' (or HCSF) requirements, unfortunately they will still have to wait.

For those who have access to credit and sufficient funds, and who are wondering about the right time to get started (or say it is better to wait), 3 reasons can push them to review their copy:

• Banks are currently on alert. In fact, it is important not to forget why they lend: to gain new customers. 2023 has been a difficult year and the start of the year is not meeting their expectations. To succeed in 2024, they only have a few months left, because it is customary for a large number of them to focus on the first half of the year. So, today, borrowers have the means to fully compete and we are even seeing negotiation margins return to the scales!
• The current balance of power is in favor of buyers. If rates and/or prices fall, a greater number of buyers will return to the market and more demand means more tension on supply. If some sellers prefer to wait for better days, not everyone has this room for maneuver: professional transfer, arrival of a child, separation, death... Constrained sales do not offer the leisure to wait. For these sellers, the sales deadline is a subject, and negotiation a real option. The fewer buyers there are, the more you will be able to negotiate!
• The return of rate renegotiation offers the best in the market today and tomorrow. If rates continue to fall, borrowers will still be likely to renegotiate their credit. As a reminder, 3 elements allow you to get an initial idea of ​​the possibility of renegotiating your credit:
  • A rate difference of 70 basis points between the credit held and the rates offered by the banks;
  • A sufficient residual duration to still pay interest significantly: in general we say that you must be in the 1st third;
  • Sufficient outstanding capital to attract the interest of competing banks for a buyout: at least €70 to €80.000.

Of course, renegotiating requires incurring new costs (guarantee fees, early repayment compensation, bank fees, etc.) but with current rates it will really be worth the cost.

Who are the project leaders who have launched since January 1, 2024 and what are they planning?

The main residence: a priority

86% of them wish to acquire their main residence, a share in slight contraction compared to the same period of 2023, but equivalent to 2022. We can clearly see here, the emergency effect of 2023 for those who thought that the shooting window closed.

Among them, the share of potential first-time buyers is increasing and returning to its 2022 level: 81%, or +1 point compared to January/February 2023.

Another positive element, despite the contraction in their number, the volume of first-time buyers has contracted less sharply than second-time buyers: -34% drop for the first vs. 35% for the second. The evolution of financing conditions and confidence in the market seem to be changing sides: between 2022 and 2023, the volume of first-time buyers contracted by 14% while second-time buyers only fell by 8%. The low level of supply of goods is also the fault of the second who are waiting for better conditions...

Aspirations under pressure

The purchase of an existing property remains strongly considered for primary residence projects:

• 79% of first-time project leaders (same as 2023 but far from 74% in 2022)
• 89% of second-time buyers (85% in 2023 and 82% in 2022)
• 87% of potential investors (vs. 82% in 2023 and 80% in 2022)

The construction of a house is less and less considered for the main residence:

• 7% vs 9% in 2022 or 2023 for first-time buyers
• 5% of second-time buyers project leaders (vs. 9% in 2022 and 10% in 2023).

But although conditions have become much tougher, the desire for a house remains strong although decreasing: future first-time buyers favor an apartment in 42% of projects (vs. 38% in 2022 and 40% in 2023) and future futures second 24% (vs. 23% in 2023 and 21% in 2022).

The purchase of a new property is picking up some colors among future first-time buyers, certainly driven by the topics of energy renovation but also by the offers from developers. But unfortunately this is the only segment...

• First-time buyers: 16% in 2022, 12% in 2023 and 14% today
• Second-time buyers: 6% as in 2023 vs. 8% in 2022
• Rental investors 12% vs 14% in 2023 and 16% in 2022

Higher income, stable contributions, but greater in proportion to the project

On the income side, the profile of project leaders is clearly higher:

• First-time aspirants have incomes 2% higher than those of 2023 and especially 6% higher than those of 2022;
• The second have incomes up almost 5% compared to 2023;
• For future investors, the average income of candidates is up almost 4% compared to 2023 and 15% compared to 2022.

The available contribution could make it possible to limit the borrowing envelope

• Aspiring first-time buyers can mobilize on average €50.289, as much as in 2023 but 14% more than in 2022. Its share would be 17% compared to the planned project, i.e. 4 points more than in 2023.
• Secondly, aspiring candidates are still counting on their overall contribution with €104.328 (including resale if applicable) or 24% of the overall envelope, but confidence in the market has declined significantly (28% intend to use a bridging loan or equivalent, vs. 35% in 2023 and 38% in 2022).

Only investors are ready to mobilize more contribution: €37.705, 5% more than in 2023 but less than in 2022 (€38.196) with for them also a larger share (17% vs. 11% in 2023, return to the situation of 2022).

For Cécile Roquelaure: “2023 will have been a unique year in many respects, but above all it will have engaged potential buyers when they hoped to take advantage of what they considered to be the last window of opportunity to buy. It is clear that at the start of 2024, aspiring buyers are better informed and probably more lucid about market conditions. Their profile, more robust in terms of income and share of contribution, is an asset for the recovery of the market in the weeks to come because they constitute our breeding ground for the spring of real estate: 9 out of 10 are still there. research stage! A start of recovery driven by much more favorable credit conditions. »

Methodology :

*Study carried out on the basis of an extraction of 49.217 new project leaders entering into contact with our agencies with the same scope of commercial policy (removal of bias in modifying lead or partnership acquisition policy) and only for one project acquisition (excluding works, professional loan, loan consolidation or stone paper financing, consumer credit, etc.) over the periods January/February 2022, 2023 and 2024.

Illustrative image of the article via Depositphotos.com.