Luxury real estate : Paris in the starting blocks

Despite coming in second position in the Top 5 in 2018, and the predictions of observers that it will become the world’s top city in the long term, Paris has taken a hit with the “gilets jaunes” (yellow vests) crisis.

The images repeatedly shown on international channels in December 2018 have tarnished the favoured status that the French capital had recovered among HNWI and UHNWI clients. However Paris has profited from Brexit, recording a significant migratory phenomenon as of 2017. All that remains is to see what the long term effect of this crisis will be, a simple warning or the beginning of a long period of turbulence...

A MARKET THAT REMAINS STRONG

Despite the adverse political climate, Paris remained on an upward trend in terms of prices and the number of sales in 2018. A global and future Olympic city and a transfer market following Brexit, the rise in prices has brought them to record levels. Several new thresholds have been crossed: the €20,000 per sq. m. bar in the 18th arrondissement in Montmartre and the €25,000 per sq. m. in the Marais for luxury apartments. According to the BARNES barometer, which is based on the average price of sales since the start of 2018, the average price of the high-end market in Paris currently stands at €11,100 per sq. m., with an annual increase of around 10 %. The number of sales exceeded ten thousand within the city, up 8%.

MOST POPULAR NEIGHBOURHOODS

Paris’ twenty arrondissements all have their own history, their specifi c characteristics, their typical inhabitants and their own architecture, particularly when it comes to luxury properties. Unsurprisingly, during the past six months or so, 5% to 10% of sales concluded by BARNES in the Marais, the 6th, 7th, 9th and 18th arrondissements have been to French citizens returning from London and Europeans from London moving to Paris. In the more “family-friendly” areas, the 8th, 16th, 17th arrondissements and Neuilly, this concerns between 8% and 12% of transactions.

Boulogne and Saint-Cloud are also popular for their close proximity and slightly lower prices for families looking for larger surfaces. Well-off young couples are opting for the more lively arrondissements where restaurant terraces appear with the fi rst rays of sun, in the centre and east of Paris (1st, 2nd, 3rd, 4th, 5th, 6th, 9th, 11th, 12th, 18th). The Louvre, Place Vendôme, Place des Vosges and its adjacent streets are highly sought-aft er by foreign clientèle on the hunt for a prestigious location. Montmartre and Les Abbesses have also become prime destinations.

The East is making a comeback with a new attraction in the tenth arrondissement: the Hauteville Paradis area which is under development. Average prices here are slightly over the ten thousand euros mark. Bastille, République, Daumesnil, close to the Marais and the Bois de Vincennes, are popular with executive-level families with children.

HIGH FINANCIAL STAKES

The international and French clientèle living abroad arrive with price benchmarks that diff er from those in the Paris region. In the Martyrs-Montmartre area, decent properties go for a minimum of €12,000 per sq. m. The market is equally dynamic in the Marais, with half of all sales going to “millennials” and a quarter of buyers coming from London. The good economic outlook, combined with a policy conducive to entrepreneurship, the development of Grand Paris, the 2024 Olympic Games, the establishment of the European Banking Authority here and the very low loan rates have all brought a new momentum to the Paris market, and foreign clientèle know it. Americans, South Americans, Asians, clients from Eastern countries, Arabs, Europeans and Swiss are also present and invest in pieds-à-terre.

CLIENT EXPECTATIONS

Ultra-high-net-worth clients are on the look out for properties that meet international standards with “highend” amenities: security is primordial (concierge, surveillance system, etc.), with a concierge service to manage the property from afar, and ready-tolive-in properties are highly appreciated. Services remain insuffi ciently developed. Clients are interested in very specifi c areas, for example, Avenue Montaigne (8th), Villa Montmorency (16th), the St Germain des Prés district (6th), and Invalides (7th) are particularly coveted.

WHAT ABOUT THE FUTURE?

Paris should see a temporary halt in the price recovery observed since 2017. However, demand continues to outstrip supply for fl awless properties, the driving force behind the market. Price diff erences are narrowing between the arrondissements, leading to a rebalancing eff ect between the diff erent areas. But 2019 is off to a rocky start due to the political and social uncertainty, which could, paradoxically, create interesting investment opportunities in the long term.

© BARNES Global Property Handbook