Mortgages remain cheap, sellers are pricing their property realistically and President Francois Hollande’s austerity position is softening, all leading to more favourable buying conditions, says the analysis from international real estate firm Knight Frank.
Indeed, Knight Frank’s French sales team have seen a significant increase in enquiries in 2014 with those registering as potential buyers more than doubling with a 144% increase in enquiry numbers so far this year compared with the first five months of 2013.
The British have made a tentative return attracted by buying opportunities, most notably in South West France, the Côte d’Azur and Provence. But the Dutch, Swiss, Italians, Americans and Spanish are more active in 2014, with online property viewings by these nationalities rising year on year. Russian buyers, by comparison, have less of a presence in France than they did a year ago.
The analysis report suggests that compared to other capital cities, Paris currently has relatively affordable properties with prime prices at a similar level to where they were three years ago. However, prime prices in South West France have declined by a further 10% in the last year taking the fall from the market’s peak in 2007 to approximately 40%. On the Côte d’Azur the sub €1.5 million market as well as the €5 million plus price bracket have recorded the most prime market sales in 2013.
An analysis of Knight Frank’s property website shows the €1 million to €5 million price bracket attracted the most online viewings in the first four months of 2014 at 45%, followed by the €5 million to €15 million price band at 33%.
Although the sub €1 million price band generated a relatively small number of online viewings, it is this market segment along with the €2 million to €2.5 million bracket which saw the largest growth in applicant numbers.
Demand has been highest in the Cote d’Azur and Provence with online viewings up 10% and 8% respectively year on year and so far in 2014 it has generated 33% of viewings, followed by the French Alps which accounted for 25% and Provence 18%.
‘Against the backdrop of the global recession, the Eurozone debt crisis and President Hollande’s austerity measures, France’s prime property market has faced considerable challenges in recent years. Nonetheless, a villa on the Côte d’Azur or a ski chalet in the Alps remain amongst the most popular investments for international second home buyers,’ said Kate Everett-Allen of Knight Frank’s international residential research team.
She pointed out that the French economy remains in the doldrums. GDP growth is forecast to reach a miserly 0.2% this year and 1% in 2014. ‘Yet against this fragile economic backdrop Knight Frank’s applicant and viewing numbers increased by 28% and 52% respectively in the third quarter of 2013 compared to the same period in 2012,’ she added.
The firm believes there are several reasons for the renewed interest in French property. Firstly, with deflationary risks increasing in Europe, the European Central Bank is considering following the lead of the UK and the US by injecting a round of quantitative easing (QE) into the European economy. The report says that if it goes ahead, it will also have the effect of driving down the Euro and increasing the appetite for French property from non-Euro buyers.
Secondly, President Hollande’s political rhetoric is certainly weakening. For some, President Hollande’s decision to reduce the CGT exemption for non-residents from 30 to 22 years is evidence of this change of approach.
Finally, an analysis of 2014’s budget implies something of a move away from the alarmist and unwelcome tax narrative that has blighted his presidency to date. Furthermore, there is the additional discount of 25% for properties sold between 01 September 2013 and 31 August 2014.
The report also points out that with prices at a seven year low in some regions there are a number of cash buyers who are seeing value in the market. Also, with the cost of borrowing at historic lows many dollar and sterling purchasers are financing their acquisitions with a Euro mortgage as a way of mitigating any future fall in the Euro.
The report says that the market continues to operate on two tiers. ‘Where property is priced accurately interest is generated, viewings are arranged and sales are agreed. However, there are still far too many properties that are unrealistically priced and languish on the market due to a lack of realism on the part of some vendors and a lack of transparency in the marketplace,’ explained Everett-Allen.
‘We are cautiously optimistic about the market in 2014. Although economically and politically fragile, France still offers solid fundamentals in terms of its lifestyle, security and investment opportunities. We expect the upturn in enquiries observed in the second half of 2013 to translate into sales in 2014, but buyers and their advisors will remain prudent and price sensitive,’ she added.
