A LEADING French estate agency group has written to its owners telling them to cut prices by 5-15% if they want to sell.
President of Orpi Immobilier, which has 1,250 agencies across France, Bernard Cadeau said: “One single factor will unlock the market and ease the access to property: sellers returning to a fair market price.”
He was speaking as banks moved to boost mortgage market activity by dropping rates to their lowest since ‘the Liberation’ with 3.23% available for a longterm fixed loan.
It means a 20-year €200,000 loan fixed in December last year would cost €20,000 less than the same loan fixed at the rates in January 2012.
Mr Cadeau said the number of loan agreements had slumped by a third in a year.
He added: “To get out of the deadlock, pending a massive new house-building programme, the only lasting remedy for the property market crisis is to drop prices by 5-15%.
“Sellers have everything to gain. They will not lose money by cutting prices to return to a fair market price.
“Not only because in seven cases out of 10 they sell to buy again – but, above all, because in 10 years, between 1998 and 2007, real estate prices rose by 140%, or six times more than inflation in the same period. In other words, even while reducing their expectations and no matter when they bought, sellers are still winning.”
Mr Cadeau said a test in Bordeaux had shown the results – cutting prices by 3% had seen the delay in getting a sale fall by 17% and increase sales by 20% in the second quarter of 2012. “If we want to unblock the market we need to get vendors to see reason.”
Orpi has been forced to move after seeing market activity on the verge of a complete halt, with sales down 16% for the company itself and 20% elsewhere. It had also seen the sale delay time rise 33%, from 70 days in 2011 to 100 days in 2012.
Its figures pointed up the difference between the asking price and the selling price for properties, which grew from 7% at the start of 2012 to 15% by the end.
While sellers wanted too high a price, buyers had seen buying power drop 15% to 20% over the past two years – against a background where prices rose three times faster than revenues over 10 years.
Buyers were also under increasing pressure from banks – despite the reduced mortgage rates – to come up with larger deposits, which had increased from 10% in 2010 to an average of 20% in 2012.