Why Energy-Wasteful Homes Still Attract Buyers
More than three years after its passage, the Climate and Resilience Act continues to have an impact on the rental market. According to an original economic analysis conducted by SeLoger based on 7 million listings and a survey by Opinion Way of 5,200 French people, the number of energy-inefficient homes listed for sale has decreased by 11.8% since January 1, 2023, while the number of properties rated A, B, C, or D listed for sale has remained stable and the number of properties rated E has increased by 1%.
This decline in the number of energy-inefficient homes listed for sale can be partly explained by the fact that 32% of the homeowners surveyed carried out energy-efficiency renovations in 2023, which enabled one in five renovated properties to move out of energy efficiency categories F or G. Other contributing factors include a wait-and-see attitude among sellers in the face of a changing regulatory environment and a complex market characterized by increasingly steep price declines nationwide.
In the rental market, there has also been a decrease in the number of energy-inefficient properties being rented out, with nearly a quarter of them having been removed from the market. This decline can be attributed to the renovations carried out by one-quarter of landlords in 2023 or to the decision by one-third of landlords—who sold their properties in 2023—to sell them due to a poor energy performance rating and a desire to avoid carrying out the renovations.
Despite the ban on indexing rents to the Rent Reference Index (IRL) for existing leases and new F and G contracts, rents for energy-inefficient buildings have continued to rise by 4.5% since August 2022. However, this increase remains lower than those observed for A/B/C/D properties (+6.3%) and E properties (+5.4%).
SeLoger has launched “Impact DPE,” a free website that allows French residents to understand, in just a few clicks, the impact of the Climate and Resilience Act on the value of their property. According to Thomas Lefebvre, SeLoger’s Vice President of Data, “The Climate and Resilience Act does not reduce the supply of rental properties, but helps ensure that the real estate market offers properties with better energy efficiency. However, certain regulations, such as the ban on indexing rents to the IRL, have limited impact. Over the next few years, the major challenge will be to enforce the legislative framework and accelerate the pace of renovations, which is currently not fast enough.”
In the current market environment, the Energy Performance Certificate (EPC) is becoming an increasingly important purchasing criterion for French consumers, whether they are excluding properties with poor EPC ratings from their searches (33%) or using it as a bargaining chip (33%). Over the past twelve months, SeLoger has observed 1.5 times as many contact requests (+56%) for listings of “G”-rated properties compared to “D”-rated properties, illustrating prospective buyers’ interest in discounted properties.
As of March 1, 2024, the average negotiation margin for a Grade G property stands at -5.9%, compared with -3% for a Grade A property. This represents a more aggressive negotiation rate, based on an asking price that is already 14% lower than that of a Grade D property—an average of €458 less per square meter.
In a bear market, prices for energy-inefficient homes have fallen by 3.7% since January 1, 2023. This decline reaches 5% in half of France’s departments. According to Thomas Lefebvre, “The Climate and Resilience Act is gradually establishing a new standard for housing in France, where energy efficiency is becoming a prerequisite. With a 16% price difference between a Grade G and a Grade D property, this ‘gray discount’ has reached a threshold that makes renovation projects financially viable. Could this accelerate the energy transition of France’s housing stock?”
