MARKET TRENDS:
Paris real estate: property prices hold steady while volume sinks dramatically...
May 2009
The latest official figures through February 2009 have been released by the Chambres de Notaires de Paris, the official French legal entity that oversees property transactions in Paris and the Ile de France.
Over a one-year period, from February 2008 to February 2009, property prices saw a paltry rise of 0.6%. That figure represents a decline in the last few months of that period, which almost wiped out the modest gains earlier in 2008. Only a handful of arrondissements were in the black for the last trimester of the period – the 9th, 15th and 16th – saw any gains at all for that period; the rest were either stagnant or in the red.
Certain niche markets in the city remain particularly strong. Top end properties in the best neighborhoods are still selling higher than a year before, although they are sitting far longer on the market than we saw up through fall of last year. Thus the Saint Gervais neighborhood of the Marais, the Sorbonne and Val de Grace neighborhoods of the 5th, and the north eastern corner of the 7th, all posted gains of 5-10% gain in the year. The real standouts were the Ile Saint Louis and Ile de la Cité in the 4th, an area that gained 16% over the year; and the chic Saint Germain des Près in the 6th arrondissement, which convincingly bucked the trend to rise 24.2% in the last year. Based on our own observations and our work with clients over the spring, it seems doubtful that these strong gains will hold when the next official figures come out.
The more significant figure is once again the decline in the volume of sales: in that same period, the number of real estate transactions in Paris declined by 43% as compared with a year before.
This decline is consistent with our own observations of the market: less sellers, and less buyers. France is not a heavily leveraged owner market, so there has not been the flood of distressed sellers that have undermined real estate markets in Spain, Ireland or the UK. Banks have tightened up their lending here as everywhere, and renters are comfortably waiting out the storm. In most of Paris, sellers are taking a wait-and-see attitude, and buyers are doing the same. From the buyer side, we are seeing more and more leisure buyers – second home, investment, pied à terre – as people with some extra cash find are looking for somewhere relatively safe to park their funds. With markets still on a roller coaster and the news that Paris is holding steady at worst, we look to see buyers again on the rise.
That prices are holding – even with volume down - is welcome news as compared with other major European and American cities, where loss in value has reached easily into the double digits in that same period. What continues is the trend of good properties retaining value, while the market is correcting the fervor in regard to run-of-the-mill properties with nothing more than a good address.