Selling real estate per unit
An old sales technique gets a second wind
Selling real estate per unit has had a long history in France, dating from before World War Two, when co-ownership was first established. The end of the economic crisis in 1991 gave the per-unit real estate market its initial momentum, and it grew steadily over the next twenty years. Today, selling per unit has gotten a second wind, changing the face of the residential real estate market in big cities.
1992-1998: Selling per unit as a way out of the real estate crisis
The real estate crisis in the nineties, concerning principally corporate properties, forced a number of established real estate institutions to sell off a portion of their assets in the housing sector to free up capital for potential future corporate real estate investments.
Sales per unit has also benefited from:
The Bulk real estate market being frozen during the real estate crisis.
Demand from home buyers remained above the price level for goods sold by bulk.
Lower real estate prices improved the buyer's credit standing.
Since 1998: Selling per unit has been an excellent asset management tool.
Since 1998, most companies "in default" have been protecting their real estate assets, giving sales per unit a second wind. Some of the reasons why include:
A housing market in constant growth in terms of both size and price, due to lower interest rates that maintain the buyers' credit ratings.
Many major real estate investment institutions are choosing to move their investments from the housing market to the industrial sector.
Price growth in the housing market has slowed down over the past year, further underlining the popularity of selling by unit. With the current situation, offering apartments at good prices in well-maintained buildings seems only logical!
Affordable Pricing
In the case of per unit sales, the buyer, whether he/she is a third party, renter, or investor; will benefit from good pricing in comparison with its value on the market. Concerning individual apartment sales, there are four separate pricing categories:
The sale price for empty apartments and houses
This price applies to houses or apartments that are unoccupied; or where the renter has already left. In these cases, each house or apartment will be advertised at the marketed price. Because there are a substantial amount of properties to be sold by unit, the owner does not need to raise the price of each sale. Each apartment is sold at market value, where the buyer purchases the goods at a fair price.
The sale price for renters
Current renters are able to buy their apartment or house at a discount ranging from 6 to 12 percent. The percentage is determined by different factors, including the rental situation in the building, the time remaining on his/her lease, and the length of time the renter has been living there.
The sale price for rented apartments and houses
In the case of the renter refusing to exercise his right of pre-emption, a third party may buy the rented house or apartment. The buyer will benefit from a discount close to the amount offered to the renter. The percentage depends on the renter's financial situation, the length of his lease, etc. Generally speaking, the longer the renter's lease, the better the discount.
In the last few years, we have observed that the percentage of sales of occupied units to outside investors has fluctuated between 20 and 40 percent.