The luxury real estate is back, where to invest in 2016?

The year 2015 marked the recovery of the luxury real estate market, according to the Barnes network. The return of “real prices” has triggered the return of foreign French buyers, who have notably demonstrated their presence in the market. Now that the resurgence is confirmed, what are the places to bet on in 2016?

It's confirmed. The luxury real estate market is well and truly off the ground, according to the network of luxury real estate agencies Barnes, which unveiled its figures for 2015 on January 21, 2016.

The volume of transactions made in 2015 is good. After two gloomy years in 2013 and 2014, 2015’s volumes equaled to an amount between 730 and 750 billion euros,. A statement shared by Alexander Kraft, the Managing Director of France-Monaco for Sotheby’s, one of Barnes' direct competitors in real estate, explains, 'In particular, since the start of the 2015, we have noted a return to normalcy in the high-end market. Our sales volume for the fourth quarter of 2015 is more than 165 million euros, up 157% in comparison to the fourth quarter of 2014. '

All professionals in this segment have observed a return of French expatriates, non-residents and foreigners. The high-end international markets, including the French market, have benefited. Foreigners, particularly Anglo-Saxons, affluent Middle Easterners, and the Chinese, have returned to France. Moreover, French non-residents also brought their investments to their country of origin, but not exclusively. 'French investors are increasingly mobile,' said Barnes President, Thibault de Saint-Vincent. “They globalize their locations and buy where heritage opportunities with high return potential and value-added exist.'

A reality check on prices

Unsurprisingly, London and New York remain the two most preferred cities for buyers. 'These are the best international cities in terms of assured value,' says Barnes' president. Following London and New York are the Asian cities (Hong Kong, Singapore and Shanghai), then Miami and Paris. 'Miami and Paris are have been upping the ranks of top places at the expense of Geneva, that is now out of the top 10, especially because of the disappearance of banking secrecy,' says Thibault de Saint-Vincent. The reason for this renewed interest can be summarized in word: prices. This is also the main driver of the restart of the luxury real estate business.

Sellers realized after 7/8 years that the prices they demanded were too high. In Saint Tropez, a villa was recently sold for 3 million euros, while initially its price was 20 million euros. The market was blocked, 'says Richard Tzipine, General Manager of Barnes. 'Prices are also rationalized in luxury,' says the president of the network. This easing of prices has helped revive the prestige business. 'Transactions are done only on the condition that prices remain realistic with a wide choice for buyers and sellers more and more flexible in their negotiations,' adds the managing director of Sotheby's.

This factor has particularly had an impact in Paris and countries in Southern Europe (Portugal, Spain, Italy), which were marked by the financial crisis, and therefore corrected their prices. 'We observe the importance of arbitrage among our customers, buying at the right time and in the right place. The business savvy is never far away, real estate is considered an investment. And I tell you, in 2016, you have to buy in Paris, 'says Thibault de Saint-Vincent. The President of Barnes augurs strong gains in a few years. Indeed, prices in the French capital have changed by only 1% between 2012 and 2015, while they have risen by 30% in New York, 40% in Miami and 42% in London. Transactions recorded in Paris in 2015 grew by 15% (38% on the Barnes network alone), while at the same time they fell by 10% in London. Moreover, in the eyes of foreign buyers, the rise of the dollar against the decline of the euro has played in favor of Paris. Barnes' agents have thus faced 'a surge in the last six months of a clientele from the Arabian and Chinese peninsula', who came in search of a pied-à-terre in the City of Light.

Another country to bet on in 2016: Portugal and especially its capital, Lisbon. 'The price per square meter is two to three times cheaper than in London or New York. Properties with sea views are selling from 1,500 to 2,500 euros per sqm. Once renovated, the added value is very interesting, reaching 5,000 to 6,000 euros per sqm,” said the president of Barnes. For holiday enthusiasts, Barnes is also responsible for Mauritius, Saint Barth and Los Angeles and Miami. For those who prefer France and its soil, they are also present in Biarritz, Lyon and Megève.

Caution, this does not yet mean that New York and London are especially to abandon in 2016. They will surely be a little less coveted their prices remained high, but they are safe bets. And thus occupy choice places in real dreams of wealthy buyers.

© Tout Sur Mes Finances - published on Barnes International on 23/01/2016

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