Luxury real estate: the super-rich return to Paris

Foreign wealthy clientele have made a comeback to the Parisian market in 2015, as Barnes reveals in its annual balance sheet. Falling prices and changes in foreign exchange rates largely explain this improvement.

On the lookout for investment opportunities around the world, the ultra-rich maintain a strong appetite for high-end real estate. They now spend on average 25% of their assets, such assets are seen as the safe haven par excellence. In the arbitration between real estate markets, major cities like New York, London, Paris, Geneva and Hong Kong remain the priority. However, the attraction of the French capital has significantly reduced since 2012. According to UBS Wealth studies and X-firm on the wealthy, Paris, which was the fifth most searched city in 2011, was demoted to ninth in 2013 and tenth in 2014

Having changed its course in 2015, “Paris, which is now back up to 7th place in the ranking of the ten most popular cities, has been benefiting from the relative stability of its prices during the last five years that in comparison to the other most popular capitals,” says Thibault de Saint Vincent, President of Barnes. International customers spotted this difference and have been regaining interested in the Parisian market since early 2015. 'The attacks have certainly had a negative effect on the market, but their impact has been limited. Barnes network shows an increase of 38% of transactions in 2015 with 738 sales recorded in Paris and the Paris region.

Infatuation with exceptional properties

Already noted by other real high-end networks, the Parisian real estate market’s recovery hasn’t only affected the capital, but has also influenced other locations where the affluent tend to vacation, such as St. Tropez, Monaco, Cannes on the French Riviera and ski resorts such as Courchevel and Megève. This can all be explained by the sharp correction in prices between 2012 and 2014 and, for foreign buyers, the leverage effect of the fall of the euro against the dollar.

'Foreign buyers have notably made their way back into our market in 2015, and did so in no time,” says Thibault de Saint Vincent. “They’ve taken advantage of low rates, a strengthening dollar and a French real estate market that is practically a given when compared to the US market, which is appreciating.'Barnes’ segment of exceptional properties, which consists of properties worth over 4 million euros, has exploded, demonstrating an increase of 340% (17 transactions in 2015 against 5 in 2014). Barnes seduces an increasingly affluent clientele, that have budgets exceeding that of 10 million euros.The apartments/houses worth less than two million have also sold well (+ 38% in sales in 2015), however, the “High-end Family Property” French clientele still suffer in 2015 due to a loss of purchasing power of the French upper class.'

Surge of Middle Easterners

Foreign investors returned to the capital and are, according to Barnes, mainly American, South American, Middle Eastern, and Eastern European, while some sales included Chinese investors. Key fact, Barnes has noted that “During the last six months, a wave of customers having been coming from the Arabian Peninsula, particularly Dubai, Doha, Qatar and Saudi Arabia.” “They buy a pied-a-terre of minimum 200 meters, with three bedrooms, a duplex of 1000-1500 sqm on the 8th and 16th (Avenue Foch). Of the 50 sales Barnes has conducted with this type of customer, they cite three examples: that of an owner of 3 mansions in surrounding area of Avenue Foch, which acquired two apartments of 300 sqm in the neighborhood for two of his children, that of an owner of a beautiful mansion on the Champ de Mars, who bought an apartment of 135 sqm on Avenue Emile Deschanel, and that of a third customer who, upon his request, made the payment of the full price and notary fees 10 days before the signing of the sales agreement.

Looking at the average of the transactions Barnes has conducted in 2015, they noticed a slight increase in prices in Paris (that of 3.18 %), more notably for goods in excess of one million euros. Regarding this year, Thibault de Saint Vincent has explained it to be “somewhat positive.” He explains, “Demand should remain very strong. After Paris, this recovery should be felt in cities like Lyon, Bordeaux, and Toulouse. The prices are slightly higher, between 5-10% for goods superior to 2 million euros, stable for goods between 400,000-2 million euros, and still rising for exceptional goods worth more than 4 million euros.

© Les Echos Patrimoine - published on Barnes International on 23/01/2016

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