US credit crisis hits property prices in Paris

Property sales in fashionable areas of Paris are struggling as US investors are feeling the effects of the global credit crunch.

The volume of apartments sold fell 20% in the year to May, according to the latest available statistics from the Chambre de Notaires de Paris.

One of the problems is that Paris attracts fewer buyers from Europe than the rest of France, with only 3% of second homes owned by Europeans. In the main, the apartment market is dominated by buyers from the US and Canada (24%), South America (35%), the Middle East and Asia (22%) and Africa (20%), according to a study by the French government.

One of the city's most expensive districts, the fashionable 6th arrondissement known for cafes where Ernest Hemingway wrote and a magnet for foreign buyers is seeing steep price falls.

'The problem with the 6th is that a lot of Americans bought there and now they can't afford to. Parisians can't afford the prices either so they are stagnating,' said Fayoud Fouad of Century 21.

Pedro Pereira, director of the Orpi Luxembourg agency in the 6th, said 30% of his clients are foreign, and fewer and fewer of them are American. 'Life is getting more difficult in the US. There is not the same number of buyers. As a result some sellers are cutting prices by 5 to 10%,' he said.

Prices in the 19th and 20th districts, on the northern and eastern fringes of the city, may gain as buyers look for bargains farther from the city centre, according to the Chambre des Notaires statistics commission

'Paris is small and there can't be much new construction,' said Lilian Cellier, an agent at the Laforet Immobilier agency in Paris. 'There will always be a lot of demand. But in the current climate that demand might not be enough to maintain Paris property prices,' she added.