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, according to the latest France Prime Residential Insight report from international property firm Knight Frank.
The French economy remains downbeat with GDF growth is forecast to reach only 1% in 2014 but 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.
The new insight report looks at a number of economic and political reasons, among them, the European Central Bank’s potential move towards quantitative easing and the toning down of President Hollande’s political rhetoric.
However, many buyers have simply been motivated by the fact that prime prices, in some French regions, are at a seven year low, and many are starting to see buying opportunities.
‘Despite the Euro’s resilience we are seeing a tentative but reassuring number of British Buyers, including expats originally from the UK, buying in South West France, the Côte d’Azur and Provence. With prices at a seven year low in some regions there are a number of cash buyers who are seeing value in the market,’ said Kate Everett-Allen, head of international residential research.
‘That said, 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,’ she added.
She also pointed out 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,’ she explained.
‘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.
The report says that compared to other capital cities, particularly London, Paris boasts relative affordability with prime prices at around €15,000 per square meter at a similar level to where they were three years ago.
Although Russians, Italians and the British are the most active foreign purchasers, Middle Eastern buyers, mostly Qataris and Lebanese, as well as Chinese nationals have been prominent above €10 million.
‘There is still a large gap between asking and achieved prices as vendors take time to acknowledge the market’s readjustment in light of the global financial crisis. The 6th, 7th, 8th and 16th arrondissements remain the most sought after locations among international buyers with the second gaining in prominence,’ said Everett-Allen.
‘New developments, partly due to their scarcity are selling well, and of note is Rue de Grenelle in the 7th arrondissement which continues to attract significant local and international demand,’ she added.
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%. However, the number of applicants seeking homes in South West France who registered with Knight Frank in the third quarter of 2013 increased by over 40% year on year.
The report says that Gascony’s prime market is currently more active than that of neighbouring Dordogne where sellers have reacted more slowly to the changes in market conditions.
In Gascony the corridor from Lectoure in the north east to Marciac in the south west is generating the most enquiries. ‘In the Dordogne a buyer’s key requirement is to be within a 30 minute drive of Bergerac Airport,’ said Everett-Allen.
The report also says that British buyers have tentatively returned to the market in 2013 and French and Benelux buyers now have a stronger presence above €1 million. The region remains a favourite with British expats located in Asia or the Middle East seeking a European base within easy reach of the UK.
On the Côte d’Azur the sub €1.5 million as well as the €5 million plus price bracket have recorded the most prime market sales in 2013 but properties priced between €2 and €3.5 million were most in demand last year.
In 2013 Cannes, Cap d’Antibes, St Tropez and Mougins have generated the most enquiries. This increase in demand follows further price reductions in the area, up to 7% in some parts compared to 2012. In 2013 Norwegian, British, US, French and some Middle Eastern buyers have been the most evident along the Côte d’Azur, many proving to be cash buyers.
‘In St Tropez, which is one of the more seasonal markets along the coast, nearly all the viewings undertaken in the third quarter resulted in sales suggesting a new purposeful and serious attitude amongst buyers,’ said Everett-Allen, adding that along the Côte d’Azur prime prices have declined by around 15% over the last two years. Knight Frank expects price falls to be marginal in 2014, slipping by less than 5% in most parts.
In Provence, which attracts buyers looking for authenticity, value and accessibility, prices in some parts of the region have slipped by 4% to 6% in the last 12 months which has led to stronger demand.
In 2013 buyers have targeted Provence’s core locations resulting in weaker demand in the more peripheral areas. Luberon, where attractive and well priced property is increasingly in good supply, has proved particularly popular.
‘Vendors that have been open to negotiation on price have agreed sales but there are others not willing to recognise the impact of the global financial crisis. It is interesting to note that in 2013 approximately 90% of sales agreed by our Associates in Provence have fallen below the Wealth Tax threshold of €1.3 million,’ explained Everett-Allen.
Those properties that have sold above this threshold have been renovated and require no additional work. Belgian buyers have been prominent in Provence in 2013, along with the British, US and Swiss,’ she said.
In 2013 Morzine and Chamonix have been the most active markets in the French Alps, both have seen prime prices increase by 8% or more in the year to December 2013 and there has been on going investment in the resorts’ infrastructure.
Prices in the most upmarket resort of Courchevel 1850 have remained stable but sales volumes are low due primarily to a naturally low level of available supply as the resort only consists of approximately 230 chalets.
With supply constrained, demand has spread down the mountain from Courchevel to Courchevel Moriand where a range of new apartment developments have been built. ‘Together with the new €70 million Aquatic Park we expect Courchevel Moriand to be the focus of increasing demand in 2014,’ said Everett-Allen.
In Val d’Isere the €1.5 million to €2.5 million price bracket has seen the most sales following a price fall over the last 18 months although in some places prices have fallen by up to 20%. Above this price threshold sales volumes have remained largely flat, the report says.
