To make a good real estate investment, or not, is not determined only at a given moment, but also over the medium/long term. Therefore, how can one know if an apartment/house, seemingly good in all respects, will appreciate over the years?
We have already addressed the topic in an article dedicated to estimating the price of a property. There are attractiveness factors that make a property a good investment. The French real estate market is a sector with solid and stable fundamentals. Nevertheless, new elements have recently come into play. We will start by addressing these aspects that have gained importance in recent months, and then we will remind ourselves of those that remain, nonetheless, significant for the valuation of a property.
The new key criteria: energy performance
With the implementation of the new energy legislation in 2021, energy performance has become crucial. It is determined through the Energy Performance Certificate which assesses the energy consumption of the property and its overall environmental impact. The highest ratings are classified as A, B, C, and D, while the most energy-consuming ones are E, F, G.
The assessor examines a set of criteria, including construction materials, heating/hot water equipment, and the presence of insulation in attics or on the exterior. These criteria influence energy consumption. A recently renovated and insulated property will gain points in the classification.
Energy class is a crucial aspect of the profitability of your investment for several reasons. Firstly, “energy sieves” will initially see their rents frozen and will soon be gradually prohibited from being rented out.
Secondly, your banker is well aware of the evolution of legislation and will scrutinize the EPC of your property to assess the viability of your project. He knows that significant (and costly) work will be necessary to rent out your property under good conditions and in the long term. Poorly rated properties have become more difficult to finance.
A recent survey by Flatlooker on the renovation costs of an energy sieve reveals estimated amounts of work to move from a G label to a D. For a T1, they are estimated at €20,700 including tax, or €48,685 including tax for a T3.
A good or bad label will also impact the liquidity of your assets. This is what notaries call the “green value” of properties: “The green value defines the increase in value generated by better energy and environmental performance of a property compared to another, all other things being equal and according to notarial bases.”
The green value of properties map
According to Notaries’ figures, old houses classified as A and B sold on average twice as much throughout France as those poorly classified (F-G). This observation applies to identical properties, all other things being equal. Indeed, other elements may come into play (geography, individual or collective housing).
Investing in a new or renovated property, meeting the latest standards, is therefore a good strategy to maximize return on investment.
Outdoor space: a real advantage now
This aspect has become very important with the recent Covid pandemic. Many urban dwellers felt trapped, confined to their homes, and felt the need for access to the outdoors, via a terrace, garden, or balcony. With the widespread adoption of teleworking, it has become possible to live further from one’s workplace, to seek larger and cheaper housing.
Having outdoor space has always been a plus. It has become even more valuable, especially for a property located in an urban area, because it is rare and highly sought after. The Carrez law does not include these areas in the calculation of usable space. However, they can significantly influence the price of a property if well arranged. A terrace with a nice view can increase the value of the property by 30 to 50%. If it is on the ground floor, surrounded by walls, it can increase the value by 10 to 25% depending on its size. For a garden, it is between 5 and 15% (size, overall condition) (Challenges Immobilier 2021 figures).
Other key elements
The intrinsic characteristics of your property
t’s a bit of an open door, but it’s important to mention. Size, condition, but also layout, environment, and amenities remain determining factors.
In a context of constrained borrowing, defects penalize sales even more. A ground floor lacking brightness, a 6th floor without an elevator, a nuisance in the neighborhood, an easement of passage, are all characteristics that can make you lose value and liquidity. It should be noted that this is less the case in areas with high rental pressure.
The location
Every investor knows: the location of a property is the keystone of profitability. What is a good location? It obviously depends on your personal objectives, and its definition will vary depending on your criteria. Nevertheless, we can identify some common points between strategies.
It is, broadly speaking, a practical and useful situation for your tenant, or one that will become very soon with urban renovation. Your property may, for example, be close to amenities (shops, schools, health facilities), public transport, employment areas, or have a pleasant setting (riverbanks, near a park).
It is therefore important to keep an eye on urban developments that concern your assets. The construction of a new tram or metro line, the installation of a company, or the renovation of a district can considerably increase the value of your property. The extensive Grand Paris project or, on a smaller scale, the rehabilitation of the right bank of Bordeaux.
Condominium fees
These are significant expenses. They correspond to all expenses related to the maintenance and operation of the building housing your property. Their distribution is determined by the condominium regulations, depending on the lot of each owner and the nature of the charges.
It is advisable to inquire about the amount of these fees before investing, but also about the work already carried out or voted on but not carried out by the condominium. All these elements are detailed in the minutes of the General Assembly that you need to obtain.
The French real estate market is driven by underlying trends that make it stable and predictable. Despite two difficult years following Covid, it has held up very well. Well-known locations, properties meeting the latest standards, will not lose their appeal overnight and constitute sound investments.
Knowing these fundamentals allows for a good choice today, to benefit from it tomorrow. Choosing a safe and resilient asset ensures liquidity when you need it most and a positive return on investment in the future.
Transparently, PATRIMOLINK accompanies you in realizing your real estate project, from defining your investment strategy to signing property documents.
Content provided for informational purposes only and does not replace current regulations. Without consultation with our experts, PATRIMOLINK cannot be held responsible for any consequences of implementing the advice and information provided in this article.
