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Paris Real Estate Market Feels the Olympic Impact.
As the countdown to the 2024 Olympic Games in Paris begins, a curious phenomenon is sweeping through the City of Light: the ‘Olympic effect’ on real estate. While property prices have been on a modest downward trend in Paris, they are holding up remarkably well compared to other major European cities. Experts attribute this resilience, in large part, to the looming Olympic spectacle, which is incentivizing property owners to bide their time and reap the rewards.
While prices have dipped, the decline is relatively modest, defying early projections. Since the start of 2022, amidst a backdrop of climbing lending rates, the borrowing capacity of prospective buyers has plummeted by 25%. The situation shows no signs of improvement, with interest rates steadily inching toward the 5% mark.
Curiously, sales prices seem somewhat disconnected from the budgets of would-be buyers. Some fortunate individuals can afford to make cash purchases. More significantly, potential sellers are apprehensive about parting with their properties, along with the low-rate loans they currently enjoy (ranging between 1% and 2%). Instead, they would be compelled to assume debt at rates of 4% or more to finance their next real estate endeavor. The exception, naturally, is in cases of exigency, such as separation or the arrival of a new family member.
However, according to real estate specialists at Masteos, there’s another dimension to the constrained supply in the market that is tempering the decline in property prices: the Paris Olympics, slated to take place from July 26 to August 11, 2024. Parisians are eager to capitalize on this once-in-a-lifetime event, which promises a surge in seasonal rentals and an increase in property values before they decide to sell.
A study by Deloitte, which we unveiled in April, assessing the economic impact of the Olympics on Airbnb, suggests that approximately 130,000 hosts are gearing up to welcome 560,000 tourists during this period. Among these hosts are individuals with a ‘wait-and-see’ approach, planning to list their properties for sale come September 2024.
As a result, Airbnb has already observed a staggering 3.5-fold surge in nightly accommodation prices during the Games compared to regular rates in the capital. Thierry Vignal, the head of Masteos, points out, “If you multiply this by the number of days of the competition and correlate it with property prices, renting out your apartment during the Games could yield a return equivalent to 4.2% of the average housing price in Paris.” Vignal has encountered numerous clients who opted to postpone their sales to cash in on these lucrative opportunities.
In Marseille and Lille, cities also hosting Olympic events, the percentage of “Airbnb income” relative to property value is slightly lower, at around 2.4% and 1.4%, respectively. This somewhat smaller windfall could be motivating some property owners to delay their sales by a few months.
Above all, property owners are wagering on an “Olympic effect” to boost the selling price of their properties. Historically, the world’s grandest sporting spectacle has proven to be a potent catalyst for real estate markets. According to the Masteos study, property prices have surged by an average of 17% between the year preceding the Olympics and the following year, starting from Sydney in 2000.
Thierry Vignal notes, “For instance, in 2016, Rio had been grappling with a bear market for five years until the Olympic Games intervened and halted the downward spiral.” Even London witnessed a 24% surge in property prices over two years during the 2012 Olympics.
Nevertheless, Vignal cautions against unfettered optimism this time around, citing the unfavorable economic backdrop that could potentially outweigh the Olympic Games’ impact. He concludes, “This sense of anticipation among Parisians may not be justified this time, given the challenging context.”
Ironically, the cautious stance adopted by sellers might inadvertently result in an oversupply of properties hitting the market once the Olympic deadline passes. As the head of Masteos predicts, “With this surplus of properties entering the market at the start of the 2024 school year, the downward trend in prices could intensify.”