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What is ahead for the Paris property market in 2018?
This year has built on French property’s 2016 recovery, but what is the general picture as we head into 2018? While the nationwide picture is fragmented, high-end property in the capital is set to outshine its global competitors according to the biggest name in luxury real estate.
Paris property price growth reached 7.8% in the third quarter of 2017, and the notaires are predicting that by the new year that will have jumped to 10%.
Huge booms in activity were seen earlier in the year in Paris as buyers rushed to wrap up deals in the anticipation that mortgage rates were to rise sharply. Activity practically doubled within the peripherique.
But the rate hike never came. Incremental rises have followed the French government’s cost of borrowing – the OAT Average, which only went up slightly. According to mortgage rate observatory and think-tank Meilleurtaux, rates now sit at 1.10% for 15-year loans, up 0.25% from the same point in 2016. It is only in the second half of the year that the realisation that low rates were a fact that activity has slowed, in Paris and nationwide.
The infographic – “Property prices: the report for 2017” – below from LPI/Seloger nicely sums up the nationwide market this year. Nationwide prices are set to grow 4.3% this year, with particularly fast movers being Bordeaux, Le Mans, Brest, Paris (10% according to the Notaires) and Lyon.
2018: boom, crash, or slowdown?
Michele Mouillart, a commentator on the property market who writes for the Journal de l’Agence, Le Point, les Echos and France Culture recently gave an interview to Seloger on what we should expect next year.
He says the outlook is definitely not as positive as it was in December 2016 looking into 2017. Firstly, buying mechanisms that have encouraged demand will be repealed or amended next year. The Pinel device, a tax exemption for buy-to-let investors in new builds, and interest free loans (PTZ) will be repealed in vast swathes of the country and restricted where they remain (mostly cities).
And rates will continue to rise at the slow pace. Empruntis thinks they will rise only 0.2% in 2018, actually less than they did in 2017. In any case, price growth in cities like Paris has cancelled out any gains in purchasing power from low rates. Mouillart also thinks margins of negotiation will increase nationwide next year, having fallen over the last few years. Demand for property being what it is in the capital, margins in Paris are about half those of the rest of the country (2-3%, rather than 4-5%).
He emphasizes that nothing is certain and it’s impossible to talk of the prospects for the country as a whole in one fell swoop. Meilleursagents, the prominent property price portal and think-tank, does not even publish nationwide statistics, deeming the market too heterogeneous.
In Paris, price growth has continued in the late part of the year despite falls in activity (compared with the early part of the year; year-on-year growth is still high) because of the scarcity of properties on the market. A small fall was recorded in October but this was a one-off. Low supply is unlikely to change with construction mostly taking place outside the peripherique as part of the Grand Paris project. Notaire reports throughout the year have seen activity pick up drastically in the suburbs, making Paris proper the target for those with a bit more spare cash and an insatiable appetite for the quintessential Paris experience.
Parisian luxury property market set to outshine New York, London and Hong Kong in 2018
In the post-election period huge swathes of anecdotal evidence appeared that showed a rejuvenation in the capital’s high-end property market. In more good news, this trend is set to increase into the new year.
A Frank Knight report says luxury property prices in Paris will grow 9% in 2018, the highest of any of the 13 global hotspots looked at. London and New York’s high-end market are set to stagnate, while Hong Kong, Berlin and Sydney are tied for second place (7% growth).
Frank Knight cites an improved economic outlook in Europe as a whole, adding that “the French capital is also back on the radar of global investors, in particular, those from the US, the Middle East, and Europe.”
Other commentators have cited the election of Emmanuel Macron as a boost to the city’s international image. The appointment of the country’s first openly neoliberal president has helped at a time when both the UK’s place in the European financial system and its economic stability look increasingly uncertain because of ongoing Brexit negotiations.
The surprise annulment of rent caps in Paris also bodes well for those with property in capital. The measure had been blamed for an exodus of buy-to-let investment in the capital. The courts decided it was unconstitutional to only apply it to the 20 arrondissements of Paris rather than the whole of Ile-de-France.
And in more good news, it was revealed earlier in the year that local property taxes will not rise in 2018.
On short-term letting, the future is more uncertain. It recently became law that all those wishing to let property through sites like Airbnb must register with local authorities, so that the city can keep track of the 120 day limits. However, only one-fifth of listings are abiding by that rule and Airbnb France is reluctant to enforce it, arguing that it is local authorities’ responsibility to alert the platform of those breaking the rules, not the other way around.
See the most recent figures from Seloger on annual price growth in each arrondissement below. The fastest growing are the 18th (+11.8%) 4th (+11.7%) and 7th (11.1%).
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