Prestige and character real estate: a positive balance sheet for 2022 and an encouraging outlook for 2023, despite an uncertain context. The castle market remains particularly attractive, with a return of foreign buyers.
A specialist in prestige and character real estate for 87 years, Mercure Forbes Global Properties posted results up +22% despite a complicated macro-economic and geopolitical context in the second half of 2022. For 2023, there are several uncertainties weighing on the property market, mainly linked to higher borrowing rates, energy costs and rising commodity prices. Nevertheless, following the opening of two new branches in 2021, the Group is reaffirming its ambitions for 2023 by pursuing its expansion in France.
“2022 has been an excellent year for the group, with sustained and rising growth, a rebalancing of our business between the city and the countryside while accelerating our structuring plan,” enthuses Olivier de Chabot-Tramecourt, group managing director of Mercure Forbes Global Properties.
The Group began 2022 with the same momentum as at the end of 2021, recording 332 transactions for a volume of just over 290 million euros. The presidential elections did not interrupt the good start to the first half of 2022, which accounted for 60% of the year’s transactions. The first signs of a slowdown appeared in July, with a drop in visits and signatures. The property market contracted in the second half of the year, impacted by the economic and geopolitical context. Rising energy costs and new environmental standards have led to a return to negotiation in favor of buyers, in the region of 3 to 6%. The slowdown in demand in major cities (Bordeaux, Lyon, Toulouse) has led to a further downturn in this market, contributing to a rebalancing of prices, except for Paris, which retains its dynamic position as a capital and an attractive destination for foreigners looking for top-of-the-range real estate in the City of Light.
Another remarkable feature of 2022 is the return of foreign buyers. While Asian buyers have not yet returned and British customers are still shy, we were able to count on American customers who benefited from the €uro/dollar parity, with a gain in purchasing power of up to 20%. The Group’s foreign investors accounted for 14% of sales, compared with 11% in 2021, when European neighbors predominated.
The castle market
Building on its leading position in the châteaux market, the group has seen a 14% increase in this segment’s share of its sales for the year, with châteaux accounting for 34% of Mercure Forbes Global Properties transactions in 2022. The group still holds 50% of the châteaux on offer for sale in France and has maintained its market share of one in three castles sold in France, with a cumulative total of over 5,100 castles sold since the 1980s.
Mercure Forbes Global Properties is strongly committed to the conservation and preservation of France’s built heritage, and has also become a patron of Demeure Historique, strengthening its ties with Vieilles Maisons Françaises and Dartagnans.
2022 or the rebalancing between rural and urban areas
The health crisis, the development of telecommuting and the quest for authenticity have intensified the rural market since 2020, resulting in a 30% contraction in the stock of character houses, manor houses and castles; particularly in the catchment areas of major cities and along major communication routes (transport, internet, services…). As for new buyers in city centers, they were able to take advantage of a more balanced negotiating environment for well-placed apartments and townhouses with small exteriors, endowed with the characteristics of fine French heritage, when in 2020 and 2021 negotiation was impossible and properties rare.
We note that demand for properties for tourist activity is on the rise, without however finding suitable properties. The second-home market remains buoyant, with activity expected to increase by 6% for the Group in 2022: an attraction fueled by the evolution of uses from the strictly secondary to the semi-main home. Facilitated by the development of telecommuting, it nevertheless remains conditional on location (less than 2 hours from the workplace) and access to services (shops, healthcare, schools, etc.).
In the market for prestige and character properties, areas within 200km of Paris and 100km of Lyon are still very much in demand. Normandy and Centre Val de Loire continue to benefit from the “telecommuting” effect and their relative proximity to the capital. New Aquitaine attracts both work-at-home beneficiaries and new retirees, while Occitanie offers a relaxed lifestyle at lower prices than the Côte d’Azur. Finally, the areas near the TGV high-speed train lines – Bordeaux, Nantes, Rennes and Vannes – are highly sought-after, but suffer from a shortage of attractive properties.
Energy transition and environmental standards: what are the constraints?
During an unprecedented energy crisis, Mercure Forbes Global Properties sees little impact on sales of heritage properties, such as castles and manor houses, which have a reputation for being energy hungry. After study, the impact of the new DPE on heritage properties will be low. At present, 47% are classified as C, D or E, 3% as B and only 7% as F or G… Buyers are remaining vigilant, making enquiries without abandoning their projects.
The Climate and Resilience Act has had several effects, however, regarding uncertainties about the new obligations, and about their technical feasibility and the costs of the renovations that will have to be carried out. For example, it is estimated.
- that the direct cost of insulating walls is between €50 and €90 per m2,
- that an apartment of 100m2 will lose 3 m2 of floor space.
- It’s hard to estimate how difficult it will be to find qualified companies to carry out the work within a reasonable timeframe…
So, while the Mercure real estate group has not seen any sales abandoned because of over-intensive renovations, its agents remain attentive to the inflationary energy context and the shortage of materials, which can impact real estate prices and induce negotiation.
The outlook for 2023 is encouraging, but uncertain given the economic and geopolitical context.
In 2023, stone showed more than ever that it retains its safe-haven value, and the trend is unlikely to be reversed this year, supported by more reasoned prices and the return of foreign customers.
The market should hold up well in the first quarter, continuing the trend seen in 2022. However, doubts about the economic and geopolitical situation, and a loss of confidence in the future with social unrest looming, could ultimately slow the market. In addition, the fiscal pressure on property due to local tax reforms, with the increase in property tax, may cause buyers to cringe. A lack of supply due to the postponement of new-build projects and the reluctance of sellers could also contribute to the market seizing up. Property with character and prestige is still proving to be a resilient market and remains a safe investment in uncertain times.
About Mercure Forbes Global Properties
Specialists and true experts, the Mercure Forbes Global Properties group has been presenting the most comprehensive selection of French real estate since 1936. From charming houses and castles to country estates, urban and contemporary real estate, the Mercure Forbes Global Properties group offers over 1,000 character properties for sale and rent throughout France. With 20 locations throughout France and an international team, the group is committed to Properties of Excellence, meeting the demands of high-end French and foreign customers.
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