I like to write about Paris. It is my favorite city in the world. That’s where I grew up so, yes, you might say I am partial. I am. But there is more. Paris, for the longest time, has been some kind of a barometer to judge the velocity of the international luxury real estate market and predict its activity going forward. Not sure it is still true, as prices in France have been erratic over the last few years, particularly when compared to the robust London market. Paris is still Paris though, and it still commands attention from high-end buyers, wherever they may come from.
Last month, I spent some time talking numbers & trends with my friend Charles-Marie Jottras, the President of “Daniel Feau Conseil Immobilier,” the market leader in the Paris region. Every year at this time, Feau puts together a pretty exhaustive recap of their own business activity during the past year. Their in-house stats, of course, do not cover all sales and volume generated by the hundreds (if not thousands) of local brokers, but, with a market share of roughly 40% of all transactions in excess of $2.5M, Feau is the best market reference there is.
One caveat to consider when interpreting the facts & numbers I am about to unveil: there is a time delay in France when it comes to reporting sales. We are looking deep into in the rear-view mirror. The data, which comes from the “Notaires” (closing attorneys if you will) is at least 3 months old when published and pertains to sales which were ratified months before. So the report is not a complete recap of all of 2014.
Paris is back! Getting there, a month at a time. After 2/3 years of market moroseness, reflected in a better than 35% drop in unit sales over $2.5M, the real estate engine is building momentum. However, prices have some catching up to do. In the price range mentioned above, prices in 2014 were 10% below their 2011 level. Now that the market is warming up and transactions accelerate, the corollary effect –the number of active listings, has started shrinking. I guess you can interpret this as good news.
According to Feau and “Belles Demeures de France,” its high-end division, two types of apartments (condos) are fast movers these days in Paris:
- Pied-a-terre combining charm and luxury located in those districts particularly sought after by foreigners as well as domestic buyers living in a different region.
- Top luxury apartment, house or mansion (hotel particulier).
The first type (pied-a-terre) with that unique Paris charm & class that one cannot live without, sells in a matter of days or weeks. Values, depending on location, benefits & special amenities, vary between $20,000 and $40,000 per square meter (FYI, there are 10.8 square feet in 1 square meter - I’ll let you do the calculations because it’s getting late…).
The second type referenced above (top luxury property), ranging in size from a low of 2,000 sq. ft. to roughly 4,000+ sq. ft., is also in high demand. Typically, this product, in addition to a most desirable location, offers the finest in amenities and a few bonuses such as views, beautiful volumes, excellent condition, and tasteful decoration. The price is set by the qualified demand, mostly wealthy foreigners. It is north of 30,000 per square meter. There is really no upper limit.
As it is more and more the case in the most expensive zip codes in the US, the best that Paris can offer in the way of residential real estate is bought by foreigners. In both 2013 and 2014, their share of the City of Lights’ properties over $2.5M was 24%. But wait a minute… If you are only looking at those luxury homes in excess of $8.5M, the foreigners’ share of the cake is… 92%! It’s a new ballgame.
Who, you might ask, is buying the crème de la crème in Paris? Well, here it is:
- The lion’s share goes to buyers from the Middle-East, with 27% of the transactions
- Next come the “neighbors,” people from various European countries. They account for 24% of the sales, down from 48% in 2010. There is less money to spend in Europe today.
- In third place, guess what, here we are… US buyers. Yes, and the percentage, which stands today at 19%, is growing rapidly (it was 10% in 2010 and 16% in 2012). The timing is ripe. Prices in Paris are about 20% more affordable for our purse today due to a near 20% drop in the parity Euro/US dollar over just a few months.
- Next come buyers from the African continent, with 16%
- The Russians are 5th, with 8% (they had 17% in 2011)
- Finally, Asian buyers accounted for 3% of the transactions. Their share of the Parisian high-end market is melting as much and as quickly as it is skyrocketing in the US. It will take me a while to figure this one out!