Real estate market


Market Point April 2023

What is the analysis of the prestige real estate market on the Basque coast? and what has happened in the last year?

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We asked ChatGPT:

"The prestige real estate market on the Basque coast has been relatively stable over the past year, despite the economic turmoil caused by the COVID-19 pandemic. Demand for high-end properties on the Basque coast continued to grow, driven by the region’s attractiveness as a popular tourist destination and the desire of buyers to have a pied-à-terre in this popular region. In terms of prices, prestige properties on the Basque coast have generally maintained their value over the past year. However, there has been a slight drop in selling prices for some types of properties, especially villas and luxury houses with sea views. This decrease in prices is attributed to an increase in the supply of properties on the market.
Regarding the trends of the prestigious real estate market on the Basque coast, buyers are increasingly interested in ecological and sustainable properties, especially those equipped with solar panels, rainwater recovery systems and other environmentally friendly technologies. Properties close to amenities such as beaches, restaurants and shops are also popular. In summary, the prestige real estate market on the Basque coast has remained relatively stable over the past year, with a slight fall in prices for certain types of properties. Buyers are increasingly interested in green and sustainable properties, as well as properties close to amenities"

It is up to everyone to assess the relevance and the current limits of Artificial Intelligence with this initial question asked to ChatGPT. It is up to us to give you our most relevant insight to share our knowledge of the market and the expertise of our business given the constant evolution of the market, the regulations of economic, political and even geopolitical contexts:

The correlation between economic activity and real estate is astonishing: the record level of stock market indices remains. It is 12% above the (already correct) level to which it was precisely 1 year ago. Coincidence, because 12% is also the increase in the average price in Biarritz since April 2022.

A record level, again, despite a combination of many factors that could (should?) have steered it down:

The strong international tensions, between war at the gates of Europe, energy war and Sino-American economic war, engendering a certain anxiety
National dissensions on pension reform, with the risk of the country being blocked, and a deep political crisis
Record inflation, which sharply increases the cost of construction: material prices have soared, with increases ranging from 15% for Placoplatre to 25% or even 30% for bathroom equipment and tiles.
The (vicious) corollary of inflation: rising interest rates/rates of wear and tear, putting pressure on the world economy and sovereign debts
«The compensatory measure»: the binding regulation of the 24 communes of the Basque Country North strictly regulating (too?) the full enjoyment of his secondary residence to (attempt to) make up for the lack of year-round rentals and the lack of housing construction in primary residences. This regulation passed on the Basque coast, applicable in the large French conurbations, cannot be transposed in the small towns of the Basque country such as Biarritz, Bayonne or Saint-Jean-de-Luz.
All these factors have prompted us to be cautious for the past year, and lead us to believe that they will succeed in curbing real estate prices. Not really...

We can nevertheless nuance this insolent rise, and delude ourselves and better understand this rise in average prices… by the decline in the volume of transactions, which varies according to the price level.

In concrete terms, two factors distort the average to create a two-speed market:

Rising renovation costs are slowing down sales of goods to be renovated, and boosting the sale of “turnkey” goods. The latter being more expensive, they weighted up the average price of m².
The rise in interest rates and the lag in the rate of wear and tear make it very difficult to grant real estate loans. The wealthiest purchasers are less affected and are vested in goods (generally renovated) and very well located. In fact, the majority of transactions are carried out by the wealthiest customers, mechanically increasing the average price.
If we note a fall in the price of real estate in the major French and European metropolises, we observe that the real estate markets are decorated one from the other. Thus, the coastal areas or mountains continue to attract more and more people. There is no doubt that the combination of the Pyrenees and the Atlantic can only challenge economic and political conditions!

The number of apartments or houses rented has not decreased significantly on the various dedicated portals (airbnb, homeaway...). In fact, the flood of property from the seasonal rental stock at the sale has not (yet) occurred. Slowly, some owner-investors who can no longer rent decide to sell, but this still seems marginal in terms of the number of properties affected by the new regulations.

We have noticed a stabilization of the portfolio of mandates over the past seven months, demonstrating a certain balance between supply and demand, even during the traditionally calmer autumn and winter periods. By taking a closer look, and comparing goods sold and goods for sale, we observe a paradoxical phenomenon in this bull market: goods sold are the most expensive than goods for sale!!!

Generally, the opposite is true. This is confirmation that the renovated goods (thus more expensive per m²) have been sold, and the goods to be renovated remain for sale, until their sale price offer the economic space for the cost of the renovation (2.5 - 3K€/m²) and allow to fall back on his feet.

There are no more seasons (in real estate), and there is no obvious logic to apprehend this particular real estate market. We could logically approach spring with some confidence, but (for now) with ChatGPT, the logic is not so predictable…

Philippe Thomine-Desmazures