The residential market is continuing to perform well with second-hand home prices gaining 3.5% in Q3 2022 vs Q3 2021. This increase was driven by the resiliency of the individual buyer market with transaction volumes in the past 12 months c. 8% higher than pre-pandemic levels, although 5% lower than the record activity seen in the 12 months prior August 2021⁴.

However, institutional investors have significantly cooled their pace of investment due to increased financing costs now outweighing passing income yields. This resulted in €3.0bn total institutional residential investment volume in H1 2022, a 27% decrease vs. H1 2021. Of note, 80% of the transactional volume in H1 2022 involved only one transaction, the €2.4bn Lamartine portfolio sold by CDC Habitat⁵. Without this acquisition, institutional transaction volumes would have therefore shown an even more acute downward trend compared to previous years.

Given the asset class’s attractive fundamentals, underpinned by low upcoming new supply and historically strong performance in inflationary environments, it could constitute an interesting buying opportunity if continued slowing investment volumes from institutional investors were to lead to a repricing. Early signs of this are showing with whole blocks now being negotiated at discounts to vacant possession (as was the norm pre-COVID-19).

• 4/Source: BNP Paribas
• 5/Source: BNP Paribas