"After two months during which the market was in shutdown mode, this first “post-lockdown” week and a half has witnessed significant real estate activity in France: visits, offers etc. Is this recovery to be short-lived? Are the first signs of a drop in prices in France showing? And what's happening in Paris?
Following the lifting of many of the country's lockdown restrictions, the major real estate networks proclaim load and clear that this first week and a half has been remarkably dynamic. In just a week, the Laforêt network recovered some 70% of its pre-lockdown activity in all of its agencies. At Guy Hoquet l'Immobilier, for the same given period (the 13th to 20th of May 2019 compared to the 11th to 18th of May 2020) visits even increased by 23.8%. At Century 21, internet browsing which had dropped by some 50% during lockdown has, since Monday May 11th risen back to 100% of its previous level. And this, for the moment, with “exactly the same prices as before lockdown, and with a lot of offers at the asking price in Paris” according to Laurent Vimont, CEO of Century 21.
A "TECHNICAL BOUNCE-BACK"
Although this bounce-back has perhaps been stronger than many anticipated, it was however to be expected and was even announced by France's Notaries. Projects were well underway and, although lockdown put them on hold, many were set to be concluded at the end of May. “Spring is usually one of our busiest seasons with 15% of the year's transactions between mid-March and the end of April. With a 75% drop in signed offers during this period, some 120,000 sales were not concluded" says Thomas Lefebvre from Meilleurs Agents.
Nonetheless a significant percentage of these transactions are still on the cards, and a number of them are urgent. This is particularly the case for those linked to a life-changing project which must follow its course whatever the context (a future child, a job transfer, a marriage or civil partnership, a marital breakdown, an inheritance, downscaling for retirement etc.) .
TOO SOON TO TALK ABOUT RECOVERY
A bounce-back doesn't necessarily mean recovery. “This surge in activity could be short-lived. Despite this technical bounce-back, the market during May and June may well be significantly less dynamic” warns Thomas Lefebvre. Meilleur Agents has in fact witnessed a drop of around 50% in the number of new sales projects since the beginning of lockdown.
"This drop is a sign of the wait-and-see attitude that both sellers and buyers adopted following lockdown," he adds. Although 90% of buyers and sellers have not abandoned their real estate project, over 40% of them would prefer to wait a few weeks or even a few months before putting it back on the rails, according to the results of a survey carried out by Meilleurs Agents *.
Among the reasons given to explain this cautionary approach, 74% of vendors fear a possible drop in prices, and some 58% fear a drop in the number of buyers. “However, this lack of confidence could be short-term as their worries are more linked to uncertainty relating to the future of the market (84%) rather than to their personal situation (23%)” Thomas Lefebvre qualifies.
WHAT DOES 2020 HAVE IN STORE?
"The real estate market should not collapse over the medium term. In this context of health crisis and economic uncertainty, 68% of those with a real estate project still think that real estate remains the safest investment today” notes Thomas Lefebvre. In an interview for the Journal du Dimanche, Alain Dinin of Nexity stated that he does not expect a massive drop in real estate prices. According to him, a significant imbalance between supply and demand will persist in France. A striking example: in the Laforêt real estate network's customer database, there are 10 buyers for a vendor across France, and some 90 buyers for a vendor in Paris, notes the network's director Yann Jehanno. For the latter "Even if demand were to drop significantly, the market would still remain favourable for vendors." An additional sign of market resistance has been observed by Meilleurs Agents in the progressive increase in the number of estimates that have been sought since the announcement of the end of lockdown. Ulimately however, "the recovery of the market will depend above all on an economic recovery as a whole and access to credit, and here there are still quite a few question marks" concludes Thomas Lefebvre.
HOW SHALL PRICES EVOLVE?
It is still too early to notice a significant change in property prices. In the Orpi real estate network, for example, when a property is put up for sale on the site, tools are used to trace the reaction of potential buyers - number of clicks, requests for information, visits etc. “For Parisian assets, it shall only be after 8 days that we will be able to compare these indicators in comparison with similar assets before lockdown. After this period, we shall be able to see whether a property has been put on the market at the right value or if it would be advisable to drop the asking price. In markets outside Paris where demand exceeds supply, this will take 15 days, and in rural areas 6 weeks” says Christine Fumagalli, CEO of the Orpi network.
THE MARKET IN PARIS
In Paris "visits picked up to reach 50 to 70% of their level a week before lockdown" notes the Century 21 CEO. In the Century 21 network, most visits relate to assets at prices between 300,000 and 800,000 euro. “There is a decrease in requests to visit more expensive family apartments." This, according to him, is largely due to the fact that "many Ile-de-France residents have not yet returned from their secondary residence where they spent lockdown." This would also mean that there could be an influx of new buyers and sellers in September, when schools are likely to return to normal. According to figures from mobile telephone operators, in total some 200,000 Parisians and over a million of those living in the Ile-de-France left their main residence during lockdown.
The assessment of the Daniel Féau network, specialist in luxury real estate in Paris, is somewhat different. Between Tuesday May 12th and Tuesday May 19th, negotiation began on 42 apartments and 17 offers have already been accepted, with many at the asking price. Of these 17 offers, 6 concern assets at prices below 1.5 million euro, 6 concern assets priced between 1.5 and 2.5 million, and 5 at superior budgets. "Very good figures" notes Nicolas Pettex-Muffat, the network's managing director.
Other figures bear witness to a certain optimism among potential Parisian buyers: A survey carried out by the group between the 8th and the 15th of May showed that for 450 Féau clients questioned with a budget ranging from 500,000 to 1.5 million euro, property research has been maintained for 80.3% of them, and has been put on hold for just 12.1% (the rest have not yet come to a decision). Of those pursuing their search, 58.5% state that they shall do so “in the next few days”, 23.6% “in a few weeks” and 17.9% “in a few months.”
Among potential buyers in this price range, the Covid-19 crisis has led to 30.2% of those questioned aiming to reduce their budget, with 2.2% increasing it. For the remaining 67.6%, the budget shall however remain as before.
SELLING BEFORE BUYING
But for Nicolas Pettex-Muffat, the most encouraging observation is that among the network's clients who are simultaneously both buyers and sellers, the vast majority want to buy before selling. 70.3% of this category of clientele with a minimum budget of 500,000 euro would prefer this option, even if it means resorting to a bridge loan. “This is undoubtedly the best indication that confidence has not been shaken. It may be interpreted as confirmation that in this segment of the market nobody anticipates a significant fall in property prices in Paris” he explains. "In a situation where confidence disappears (in the autumn of 2008 for example), the sale of the main residence was an essential step before moving on to the next acquisition" he continues. This confidence is also reflected in how prices are expected to evolve. Of the total 902 questioned with a budget in excess of 500,000 euro, although over 75% foresee a fall in property prices over the next 24 months for France as a whole, over half (52.7%) expect stability or an increase in prices in Paris and its nearby western suburbs, and 61.5% think that the price of assets matching their search criteria shall follow suit. 75.1% foresee that the demand for 3 or 4 bed family apartments shall continue to exceed supply, especially in Paris. Finally, 70.8% of those questioned think that demand for assets with good rental potential shall continue to exceed supply as long as credit interest rates remain attractive."