"Green is the New Black: How Energy Efficiency is Shaping the French Property Market in 2023"

As electricity prices continue to rise, homebuyers in France are increasingly looking for energy-efficient properties with good ratings. With energy-efficient features such as insulation, double-glazing, and solar panels becoming more important, sellers are under pressure to ensure that their properties meet the required standards to attract buyers.

Despite a few years of strong growth in the French property market, prices have started to stabilize and a slight drop is expected in 2023. However, according to experts, there is no need for buyers to panic as no serious price crash is expected.

Eric Allouche, CEO of ERA Im­­mobilier France, which has 500 agencies, is optimistic about the market. He said, "Property is still attractive and that is not going to change. We have started a period of stabilisation or slight lowering."

Overall, it seems that the French property market is evolving with the times, with energy efficiency becoming an increasingly important factor for buyers. For sellers, this means that ensuring their properties are energy-efficient could make all the difference in attracting the right buyer at the right price.

The French housing market is showing signs of slowing down as sales volumes are predicted to return to a more "normal" level. Century 21 predicts a decrease of 5-7% in 2023, although agencies admit that there are too many unpredictable factors to speak with confidence for the long term. Notaire data for 2022 shows just over 1,100,000 sales, which is a 6% drop from 2021, but still the second-highest on record. Despite this decline, the reduction in sales has not led to heavy falls in selling prices, although prices are expected to lower due to the lower sales volume.

One factor influencing the French housing market is the growing concern over the cost of maintaining a house. Buyers are becoming increasingly interested in DPE energy-efficiency checks and are looking for properties that require fewer upgrades or renovations. In particular, buyers are showing more interest in renewable-energy heating systems, which are often good value to run, while sellers are advised to consider renovations to avoid their properties losing value because they don't meet current standards.

While the French housing market is generally slowing down, some areas are experiencing more significant declines than others. In particular, rural areas are more affected by the drop in sales and the decrease in prices. However, some cities, including Paris, are expected to see prices fall more than the average due to the steep rises seen in recent years. Despite this, property in Paris is still considered a solid long-term investment.

The French property market has remained strong, with buyers in France being protected from steep interest rate rises by a cap that prevents the cost of borrowing from exceeding a certain level. The cap is currently around 3.5%, which is up from last year by one percentage point, and it is set to be revised monthly for the next six months to provide greater flexibility for banks. As a result, banks may be able to agree to more loans, even to those with smaller deposits.

French banks mostly offer fixed-rate mortgages, which provide buyers with confidence and are considered safer than the variable rates offered in countries like the UK and US. With a fixed rate, buyers know that their monthly payments will remain the same for the duration of their mortgage, protecting them against possible interest rate hikes in the future. This is in contrast to variable rates, which can rise and fall in line with market fluctuations, making it difficult for borrowers to predict their monthly payments.

Despite the strength of the French property market, some bankers have predicted that interest rates, including insurance, could rise to 6% by the end of the year. However, experts like Mr. Allouche believe that this is an overestimate and that interest rates will continue to follow the inflation rate. While inflation has risen by around 6% year on year in France, it is still contained compared to many other countries, and there are signs that it may be easing.

Buyers in France can expect to negotiate around 6% on average from selling prices, according to a market 'barometer' by online property specialist LPI and SeLoger. While there is more negotiation in the market now, Mr. Philippe Buyens of the Capifrance group stated that the market is holding up well, with sellers still unwilling to lower prices below what they believe their homes are worth. However, he did mention that there is more negotiation now than there was in 2021 and 2022, which were considered unusual years for the property market.

Holiday home sales and northern Europeans moving to France are continuing, with fewer British buyers post-Brexit. While the market is not racing, it is still ticking along. In some areas, there has been a slight slowdown in sales since summer 2022, but properties are still selling, and there are still buyers in the market. According to Robert Welton of Bel Air Homes, Brittany, British buyers now make up around a quarter of his business, down from around 45% before the Brexit vote. Still, their place has been taken by French buyers, with Belgians, Dutch, Germans, and Italians making up around 20% of buyers, which has not changed.

For those considering buying property in France, delaying for lower prices later is not a good approach. With interest rates predicted to rise, delaying a purchase could result in significantly higher costs in the long run. Mr. Allouche gave an example of how waiting for lower prices could end up costing a buyer more in the end. He said that if someone borrows €180,000 at 3% with €1,000 to pay per month for 20 years, after which time the loan will have cost them €60,000. However, if interest rates reach 6%, it will cost the borrower twice as much, €120,000. Therefore, prices would have to fall significantly to make waiting worthwhile, and that is not expected to happen in the coming months.

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