The seller, that unknown variable in the housing market

[February 2024] The work presented below is the fruit of two complementary, yet distinct, approaches: first, the Barometer survey of property sellers based on an analysis of residential property sales made in 2022-2023 and, second, the BPCE L'Observatoire research founded on intentions to sell expressed in November 2023.

What sales were made in France in 2022-2023, and why?

The “property sellers” barometer survey

Sellers of residential property belong to a central yet little-known category of economic agents. Public statistics provide no data on sellers, and market players tend to focus their research on buyers rather than on sellers. The “property sellers” Barometer survey was designed to fill this gap by tracking home sellers and analyzing their concrete behavior through a recurring questionnaire-based survey carried out throughout France. 
The “property sellers” Barometer survey, sponsored by BPCE L’Observatoire, was created and conducted by Alexandre Coulondre and Claire Juillard. While the first wave of this survey, published at the end of 2021, covered the period 2020-2021, this second wave focuses on 2022-2023, a pivotal period in the French housing market, severely tested by the economic climate.

The properties sold

We tend to look at the housing market from the point of view of the purchase/sale of principal residences, and it is true that 48.7% of the  properties sold in 2022-2023 were primary residences. 
But a very significant proportion of the market concerns properties other than primary residences. Second homes accounted for 19.3% of properties sold in 2022-2023, a proportion that has grown by 2 percentage points since 2020-2021. What is more, 17% of the properties sold were acquired to be leased out as rental accommodation.  

Professionals playing a central role in the market

When it comes to putting a property up for sale, sellers tend to hesitate between different approaches, multiplying their points of entry into the market. The process they follow involves the exploration of various options, with the consultation of several different types of intermediaries (real estate agencies, Internet sites for ads placed by private individuals, etc.). 
In the end, however, professionals (estate agents, brokers, etc.) play a central role, helping to find the ultimate buyer in 69.7% of cases. They also represent the primary source of market information for sellers who turn to them first of all for information about property prices. 
It should be noted, however, that in 10.7% of cases, the buyer is found through word-of-mouth contacts, a fact that emphasizes the importance of the informal market in the process of buying, and selling, residential property.   

Selling in order to buy

In 67% of cases, a home is sold to buy another piece of residential property. In the remaining 33% of cases, home sales do not feed into the real estate market directly but respond to other issues, such as giving a loved one a financial helping hand. 
If we focus exclusively on the sale of principal residences, in 65% of cases they are motivated by the purchase of another main home. It should be emphasized that the sale and purchase of principal residences is a market in its own right, obeying its own set of rules.  
The sale of an inherited property does not lead to the purchase of another home 45.7% of the time, although this proportion drops to 7.5% when the property sold is a principal residence. In other words, the origin of the funds generated by a sale determines the way the money is subsequently used.

How do sellers determine their asking price? 

87% of sellers use market information to estimate the asking price of their property. They tend to synthesize the information at their disposal and consult several types of price references: the price of homes already sold and still for sale, as well as estimates and average prices per square meter. They get their information primarily from professionals but also use digital sources to find price references and generate online estimates. 
12.9% of sellers use no third-party information at all. This proportion has fallen by 2 percentage points since 2020-2021, which may reflect the impact of the open data policy and the multiplication of intermediaries on the digital information market. 
The practice of not using house price information to estimate the price of one’s own home underscores the fact that adopting a rational approach (based on aligning the price of a property with the going market rates at a given time T) is not the only approach chosen by sellers, although rationality is the preferred choice of the majority. 
Sellers may use parameters other than the market price to determine their own asking prices.  In 32.4% of cases, sellers use the price they originally paid for their home to calculate the price they would like to sell it for. In 23% of cases, they include any investments they have made on home improvements.
These figures may create a ratchet effect, helping to explain why prices only fall after a decline in property transactions with the end of a bullish market cycle.

Price and condition of the property

More than half of sellers (55.2%) consider that they have chosen a mid-range asking price.
The perceived condition of the property is a criterion widely used by sellers to fix their asking price. Only 39% of sellers of refurbished properties set their price in the middle of the range while 41% aim at the upper end. Conversely, the price of properties that require refurbishment or to be refreshed tends to be gravitate towards the bottom or middle of the range. 

The EPD of the property sold: reality and perception

Considerable attention is now paid to the energy performance diagnosis (EPD) when selling a property. 
Only 11.9% of sellers are unaware of the property’s energy diagnosis. Between the two waves of Barometer surveys, the proportion of sellers who think that the EPD played “no role” in the sale of their property declined by 3 percentage points to 31.9%. Conversely, the proportion of sellers who consider the EPD played a “significant” role rose by 3 points, to 21.2%. The EPD is becoming increasingly important and a growing asset. 
But the way home sellers view this diagnosis is subject to a certain amount of misperception, a bias especially visible at the upper and lower ranges of the scale: 13.5% of sellers claim to have sold a property classified A or B, whereas only 6% of properties sold in France and 5% of the housing stock overall belong in these categories. Conversely, 9% of sellers claim to have sold a property classified F or G when 18% of transactions in France and 17% of the housing stock are rated at this level.

The EPD has an impact on the asking price

Whether its influence is real or imagined, the EPD has an impact on the asking price. Sellers who feel their properties belong to the higher energy performance categories are more likely to fix a price towards the top of the range. 15.1% of prices in the upper price range are associated with an A- or B-rated property, compared with 11.9% on average. Conversely, 24.6% of prices in the lower price bracket are associated with an E rating, versus an average of 19.4%.  
It should be noted that the effect of the EPD is not systematic given that it interacts with a number of other parameters: the physical state of the property and, as we have seen, the initial purchase price and any home improvements made, but also the overall characteristics of the dwelling, its geographical location and prices observed for similar properties in the local area, etc.

The diverse profiles of future sellers

The BPCE/Audirep Savings & Investment Barometer survey, carried out three times a year since 2019 among a sample of 2,000 French people over the age of 18, sets out to capture the way French people view the economic context, to monitor and anticipate household savings and investment behavior and, since 2020, their expectations regarding real estate. 
The wave of questionnaires fielded in November 2023 is based on a survey carried out in an economic environment that has become less favorable to real estate with the accumulation of factors triggering a decline in households’ real estate purchasing power (weakening of the French economy, rising French preoccupation about the future, inflation, growing worries over employment, exceptional and rapid rise in interest rates, tightening of conditions enabling people to take out home loans). Despite the fact that perceptions of the current economic climate are at their darkest, we can see that French people’s views of the real estate market and their real estate projects are evolving more slowly.

Perception of the economy and intentions of future sellers

Intentions to sell (corresponding to projects that are currently ongoing or planned for the next 12 months) are on the rise, remaining at a high level and even outperforming their medium-term trend:

  • Overall, projects are at their highest level since June 2023 (BPCE/Audirep Barometer survey), compared with the period running from November 2020 to November 2022,
  • Plans to sell a primary residence remain predominant, ahead of plans to sell a second home (with a slight increase observed since the 2nd half of 2023), rental property or another real-estate asset (e.g. inheritance),
  • Plans to sell property, however, confirm that principal residences account for little more than half of all household divestment operations.

When asked whether they feel that now is a good time to sell a residential property, the French generally say that it is a bad time to sell. However, the outlook seems less negative for people planning to sell in the future, and 33% think it’s a good time to sell, an opinion shared with only 16% of French households overall.

Price expectations

Although the image enjoyed by real estate is holding up, it has gradually lost some of its luster every month since 2021/2022. At the end of 2023, we witnessed no collapse in intentions to buy property but a decline in ongoing projects was observed. This gradually contributed to lower expectations while the volume of existing property transactions fell sharply in 2023.

However, the French still do not expect prices to weaken. In general, households are increasingly less likely to anticipate price rises, with 24% expecting a moderate rise (with 14% still believing that they are likely to rise sharply) and, while more are looking forward to a moderate decline in prices (22%, compared with 4% who anticipate a sharp drop), the bullish view continues to be the generally held opinion. 

The expectations of people who intend to sell property in the future remain close to the French average (40% expect property prices to rise in the next 12 months, compared with 25% who anticipate a fall). However, unlike the average French person, their expectations about prices have held up well since June last year, and seem to be stabilizing, a perception reinforced undoubtedly by the fact that people do not entirely recognize or accept the downturn in prices. In June 2023, 26% of future sellers expected prices to fall in the course of the next 12 months, compared with 25% in November.

Future sellers’ worries about completion times and prices

The current economic downturn in the residential property market is creating new worries for future sellers, notably about the time it will take them to sell their properties, with the risk of longer completion times increasingly adding to their preoccupations, as well as the need to reduce the initially hoped-for sales price in order to clinch the transaction. 

59% of French people with sales that are either in progress or planned for the next twelve months say they are concerned about the length of time it will take them to sell their properties, and 58% anticipate having to cut their prices. 

And, should they find it difficult to sell their property, 51% of future sellers would be prepared to agree to a lower price, while 49% would prefer to wait, or postpone putting their property on the market, or keep it there for a longer period, in order to sell at the best possible price. 

In conclusion, under current conditions, the majority of French people who are bringing – or are liable in the short term to bring – old-build properties to the market see the need to adapt to new prevailing market conditions without, however, falling into the trap of selling in a hurry.

The EPD, a new decisive factor

The EPD has acquired ever-greater importance as a factor that guides the choice of market players. While properties with an EPD rating of F or G account for only some 18% of transactions, 48% of sellers state that their plans to sell are partly motivated by “tighter restrictions on low-energy-performance homes, especially those rated F or G”: 

  • 17% are completely and 31% are partially motivated by this consideration,
  • 48% of sellers consider that the EPD has no bearing on their plans to sell their properties. 

Consideration of the EPD seems to have two types of effect on the intention to sell properties:
–    On the one hand, the energy efficiency diagnosis tends to increase the number of owners wanting to sell their properties, notably in multi-family residential units, because they expect to suffer a decline in the future value of their properties, or who, as private landlords, prefer to avoid committing themselves to renovation work without the certainty of recovering their costs,
–    On the other hand, the diagnosis depresses selling prices by exerting additional time pressure (with the rapidly approaching deadlines for rental properties) and pressure related to the property’s underlying value given the cost of the work required to gain at least two energy classes. 

The gradual inclusion of how the EPD effects the way home prices are determined (possibly to the seller’s advantage in the case of a positive diagnosis, or to the buyer’s advantage if the opposite holds true) is now proceeding within the context of a property market characterized by greater selectivity, a situation that could result in an amplification of its effects on housing prices. The time factor will play in favor of buyers and strengthen their negotiating power on prices, as will the assessment of the cost of the work required to improve by one or more classes the energy performance of individual homes subject to energy audits.

Four different rationales for property ownership: residence and source of wealth 

  • Those wanting to buy a property (62%) and who, in their majority, plan to live in it: 15% of them are senior citizens selling their main residence for a new one; among those under the age of 50, 52% are selling a second home or rental property, and 58% are planning to buy a main residence.
  •  Those wanting to reinvest (15%): 78% of them are selling a second home or rental property, and 58% intend to make a rental investment or acquire another property.
  • 15% of future sellers have no intention of making a new purchase or occupying the property themselves. For 2/3 of them, they are offloading a second home or a rental investment.
  • Lastly, 8% of future sellers are offloading property (for 2/3 of them, a main residence) without buying another property, with plans for changing homes frequently.

Different seller profiles with distinct preoccupations

A typology of future sellers has been drawn up based on two types of determining variables in the sale of a home: on the one hand, the attitudes, perceptions and anticipations that explain the behavior of future sellers, and on the other, the characteristics of the properties for sale (type of residence, EPD, geographical location, etc.). Two main axes relating to sellers’ attitudes emerge from this research: one relating to the acceptable length of time before selling the property (whether or not they are in a hurry to close the deal), the other concerning the anticipation of a possible reduction in the initially hoped-for price. 

Four profiles stand out:

–    Phlegmatic sellers (27%): these households, comprised of more elderly individuals with monthly incomes of between 2,500 to 5,000 euros, live in the countryside and are not planning to move any time in the near future; they are patient and want to sell their main residence at the hoped-for price without any reduction, and their transactions tend to be planned for the future rather than being currently in progress.
–    Resolute sellers (26%): the population in this category is fairly young (under 49 years old), from higher CSP+ socio-professional categories, predominantly male and living mainly in the Paris region or on the outskirts of a large city. These sellers (and buyers) tend to have ongoing projects and think that their property, often a second home, will be sold at a reduced price. 
–    Optimistic sellers (24%): living in large conurbations, notably in the Paris region or in the south of France, most of these people have plans to buy or move that are already underway. They are impatient and eager to get the price they expect for their property, which generally concerns their main residence. They are the most likely to expect prices to rise in the next 12 months and in the medium term.
–    Realistic sellers (23%): chiefly retired and inactive, they are evenly divided between men and women, and live in medium-sized towns or in the suburbs of large cities. They are more interested in selling a rental property, and are patient, believing that their property will sell, albeit at a reduced price.

This typology clearly reflects the growing importance of the EPD as a factor influencing the decisions made by future sellers. The two groups most inclined to sell quickly – the “resolute” and the “optimistic” – consider (at respectively 73% and 61%) that their sales project is linked at least in part to the tightening of energy performance constraints whereas only 8% and 35% respectively of the other two groups – the “phlegmatic” and the “realistic” – share this opinion.

To find out more (in French only)

To find out more (in French only)

Présentation de la conférence de presse du 27 février 2024


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