Real Estate: Climate and Sustainability Act Shakes Up the Market
With the entry into force of the ban on renting G+ properties at the beginning of January, the Climate and Sustainability law is increasingly taking place in French real estate projects. Decryption…
Will 2022 mark an acceleration of the effects of the Climate and Resilience Act on the real estate market? What do the French think about these regulatory changes in favor of the housing energy transition? Rent ban from 1er G+ goods expected January 2023?
SeLoger investigated these questions and detailed the real effects of the Climate and Sustainability law on the real estate market with an economic analysis based on 5 million ads and an opinion survey conducted by OpinionWay with 5,000 French people.
The Energy Performance Diagnosis (DPE) is becoming the criterion of choice for French …
8 out of 10 French have already heard of the DPE, even if 71% of them are still unaware of the new reforms. Although only 200,000 G+*** properties will be affected by the rental ban on 1 January 2023, the French have already made DPE a selection criterion. Indeed, 90% of prospective buyers already state that they only visit properties with good DPE or consider bad DPE as a negotiating argument.
… and search criteria in SeLoger
Ignored by the general public a few years ago, DPE is now presented as the selection criterion in real estate research. To meet the French need to be able to select properties by DPE class, SeLoger has made it a new search criteria on its website.
“We are proud to introduce this new search criteria for the DPE class that has become important to project leaders. It is also in line with our ambition: to facilitate real estate research by best meeting the needs of all our users. We also chose to launch this new feature this year because the DPE class now covers 83% of ads, a number that has been steadily increasing in recent months.”, Caroline Evans de Gantès, Managing Director of SeLoger.
Significant growth in sales of thermal filters since 2021
Many owners did not expect the various terms of the law to take effect: heat filters now account for 19.2% of all goods for sale on SeLoger (vs. 11.2% in 2020).
“There are several realities behind this growth. It should be noted that the new calculation method and the obligation to provide the DPE class in the advertisements of properties for sale caused this increase. DPE has also played a key role in all real estate sales decisions: whether primary residence, investment or secondary residence.”, says SeLoger Scientific Director Thomas Lefebvre.
Unintended impact: It’s interesting to note that sales projects affected by bad DPE are not just homeowners covered by the law.
“This is also affecting the selling choice of primary residence owners (31% of primary residence sellers decided to sell due to poor ECD) and even more second home owners (50% of them). This move can be explained by the fear that such apartments can represent in terms of costs and maintenance time, the importance of energy cost in the context of inflation and the possibility of loss of property value by owners.“, adds Thomas Lefebvre.
This increase in thermal sieves is valued differently in the French territory, depending on the market tension. Thus, the Paris market, dealing with a low period and experiencing an oversupply of goods for sale, is seeing 4 times more filters on sale compared to July 2021, which is 37% of the total stock of goods currently on sale. On the contrary, in Marseille, where the real estate market is booming, everything is for sale, even thermal filters, which represent 4% of the total inventory for sale in 2021 and remain at the same level in 2022.
Since July 2021, the prices of thermal filters have increased 2 times less than other goods.
ECD affects both supply and demand for goods. In terms of intentions, 40% of prospective buyers consider a bad DPE as negotiating leverage. At the same time, prospective sellers say they are willing to lower the price of their property due to ECD (79% for sellers of primary residences and 57% for sellers of rental investments).
Thus, the filters are offered at an average selling price -3.9% lower than the equivalent non-filter product in the market. In addition, transactions involving thermal sieves are more negotiated than other properties: about 70% of F or G apartments are negotiated in the 10 largest cities (excluding Paris), compared to 61% for higher-end properties. . These negotiations are also more aggressive for these properties with a negotiated margin of -5.6%. Average in France (versus -3.7% for goods in other classes).
Therefore, there is a significant difference in price development when it comes to filters or not. Filter prices in France increased by an average of +3.7% from July 2021, which is 2 times less than other goods (+7%).
Homeowners would rather sell than do business
So it appears that a number of landlords have decided to sell their F or G properties rather than renovate them to rent.
“By gradually banning rent in the worst energy classes, the Climate and Sustainability Act is gradually pushing the real estate market into a new dynamic. We are early in the calendar, but the effects are already visible beyond the simple investment market. With more filter inventory on the market than 18 months ago, and more knowledgeable buyers and sellers willing to move prices down, DPE has become a real valuation metric. Thus, the energy filter is offered in the market at a discount of -3.9% compared to the same product with a better energy label. This will be negotiated at -5.6%. In addition, this gap is widening, as evidenced by the differences in price evolution between filters and filters.“, concludes SeLoger Scientific Director Thomas Lefebvre.
The data comes from a SeLoger study based on 5 million ads and an opinion survey of 5,000 French people by OpinionWay.