Making Homes More Affordable by Tailoring It to Their Future Owners: A Paradox?
French large cities are currently witnessing a steady rise of home prices. In Paris, a square meter’s average price is superior to €9,000; it reaches €4,500 in Lyon and Bordeaux. In 2017, prices rose by 8.6 percent in Paris, 7.7 percent in Lyon and 12.1 percent in Bordeaux – all while French nominal wages only grew by 1.9 percent The gap between real estate prices and the revenues of most people in France is widening.
Consequently, affordability issues arise: it is harder and harder for French households to take their first step on the property ladder in these cities, even if their purchasing power has been boosted by low interest rates over the last few years. For instance, with a €1,000 monthly mortgage payment during 20 years, you can only buy 22 square metres in Paris, 47 square metres in Lyon and 46 square metres in Bordeaux. This situation has a deep psychological and social impact in a country where homeownership is a dream shared by most households, as well as an important status symbol.
How to reduce home prices?
Many solutions have been implemented by the French government, local authorities, housing associations and developers to try and break down the barriers to homeownership. These include government bonuses to help people buy their first home, and tax exemptions to support real estate investors so that more homes are produced and the prices can start falling.
At habx, we think that a more radical path should be explored as well: reversing the relationship between supply and demand in the real estate industry. Today, most of real estate developers produce standardized homes, whose floor spaces and floor plans are based on average data. Then, they try and sell it to real, unique people, willing to find the place that perfectly meets their lifestyle and their wishes. As the purchase of a home is often the most expensive investment of a lifetime, it is normal they expect their home to suit them perfectly. There is obviously a mismatch between supply and demand, which leads to future owners’ disappointment and to inefficiency: a lot of time and money are wasted during the selling process in trying to make people buy places that have not been designed for them. The solution: transforming the real estate industry into a demand-driven sector.
The habx way: tailored housing & optimized business model
In France, marketing costs comprise between 4 and 13 percent of a new build home’s sale price: 1 percent for advertising and between 3 percent (in-house very standard sales) and 12 percent (high-end outsourced sales) for sales. The habx method can lower these costs by 8 percent.
We achieve this by involving future owners in the design of their home (house or apartment) at the very beginning of real estate projects in which we are taking part, before floor plans are drawn by the architect. Thanks to our online co-building platform, potential future owners express their wishes about the design of their ideal home and can instantly see the impact of their choices on their future apartment’s price: floor space of the home, number, type and size of the rooms, interior design, floor, sun exposure, outdoor areas. Future owners’ involvement leading to a collective design of their homes is the reason why we called our concept co-building.
For a 40 to 50 unit project, hundreds of people generate their dream apartment on our platform. The analysis of this data enables us to help developers know the types of apartments are going to meet local demand. After that, we use our platform to identify people willing to go one step further by signing a reservation agreement. We customize with them their apartment floor plan: producing floor plans meeting their demand, check if they are happy with them and submit them to the project’s architect to validate them.
Thanks to this method, we reduce home prices and offer a greater value for money to future homeowners. We reduce marketing costs thanks to digitized marketing, reducing risk because the homes that we sell meet local demand.. At habx, we have a firm conviction: thanks to co-building, tailored, affordable, sustainable homes and cities can be shaped. Let’s imagine them together!