Construction finally on the up in Paris

The construction industry in Paris can breathe a small sigh of relief. Nominations for new housing starts rose 5.5% in late February after 0.9% in late January.

Such a rise is being heralded as a sign that the sector has turned a corner from the slow growth spurned from the Eurozone sentiments of yesteryear.

In late January, the increase was only 0.9%, according to figures released by the Ministry of Housing. On their side the building permits granted for new homes posted a strong rebound of 18% year on year to 102,300 over the same three months.

This positive trend is being welcomed across the market, with multiple property apartment buildings representing 53% of the permits issued.

Foundation stone laid at new Longchamp racecourse

With trowel in hand, on Monday Edouard de Rothschild, President of ‘France Galop’, placed the first stone of the new Longchamp racecourse, which will now be closed until September 2017.

“Longchamp is the flagship racecourse gallop in France. Opened in 1857, it was renovated in 1966 but with time, it became essential especially to redo the stands,” he said.

“The idea is to make an aesthetic place where there will be various activities other than shopping,” he added. To attend this symbolic laying of the foundation stone of the stands that will be topped with a transparent panoramic glass building.

As you’d expect, a lot of detail has gone into the planning to minimize the impact on the environment. Recovered and recycled materials, including 30,000 m3 of concrete are being used throughout the structure.

The capacity will be greatly increased with the construction of five new buildings that will accommodate up to 70,000 people. Closed since 5 October for two years of work, the Longchamp racecourse auctioned various pieces of furniture and objects dating from 1960 to 2015, totaling some €137,000.

In 2011, the budget for rebuilding was estimated at about €80 million. Now the bill is punchier and is expected to exceed 130 million euros.

March 2016 – French Mortgage Transaction of the Month

Buyers choose 50/50 interest only & repayment mortgages

The lure of an interest only mortgage is normally the low monthly payments, but with long-term French mortgage rates so low, many clients are opting for a mixed interest only and repayment set up.

A 50/50 arrangement this way provides a combination of both low monthly payments and some relative long-term security provided by the 20-25 year fixed rate mortgage options.

As interest only loans in France often require foreign buyers to have net assets to the same value of the requested loan amount, buyers can sometimes fail when it comes to affordability. The 50/50 solution therefore provides them with a way of accessing the interest only market.

“Reinventing the Seine”…40 sites to be developed along the Seine

“River cafes” on the Seine in Paris, leisure areas facing the river in Rouen and student housing on the water in Le Havre (Seine-Maritime) are some of the projects that may arise from the programme called “Reinventing the Seine”.

Each project will be on brownfield plots (previously used for commercial opr industrial purposes) between Paris and Le Havre, via Rouen as part of a wider plan to create innovative new uses for the banks of the Seine.

The ideas have been inspired by “Reinventing Paris”, the campaign launched by the mayor of Paris to promote and gather innovative ways of creating new urban area with the future of 22 sites in the capital.

Anne Hidalgo (PS) mayor of Paris, Edouard Philippe (LR), deputy and Mayor of Le Havre, and Frédéric Sanchez (PS), President of the Metropolitan Rouen Normandie will soon unveil and identify the sites to be sold or leased to the winners after the contest in the spring of 2017.

The capital has selected twenty sites. Floating structures may be anchored at the foot of Notre Dame. Three “coffee-bridges” on the Seine might house bars, restaurants or hotels. Property governance Eau de Paris, an old water purification plant water of the Seine at Joinville-le-Pont (Val-de-Marne) could become an urban agriculture site.

A dozen sites were identified in Rouen and its surroundings, with mixed use projects potentially on the horizon. Nine sites have been identified in Havre, including three pools near the train station.

February 2016 – French Mortgage Transaction of the Month

HNW buyers also opting for 20-year fix, but banks prefer company structure

As we explained last month, the most popular product with non-residents is the 20-year fixed repayment mortgage at 2.70% at a loan to value of 80% and this trend remains the same. However, it’s not just the core range of buyers in the €400,000-€800,000 budget range that are opting for this product. International buyers with much larger budgets are utilising this long-term value too.

February’s transaction of the month is for a €3.7m chalet in The 3 Valleys on the 20-year fixed mortgage at 2.70%. This client bought using a company structure, which is common amongst high price purchases as it can be much more favourable when is comes to taxation. A company structure can greatly reduce wealth tax exposure and is very flexible when it comes to inheritance tax as children can be given shares at little or not cost to the property (or company) owner.

Using a company structure for a bigger loan amount also gives banks a little more confidence. This is largely due to the simple fact that they can send any statements or important correspondence to a registered French address, rather than one overseas.

January 2016 – French Mortgage Transaction of the Month

The huge amounts of long term value currently available in the French mortgage market are pushing those with a long term view to stretch their loan duration to the maximum possible length.

This month’s French mortgage transaction of the month is an example of the long term game some buyers are playing. The client, 40 years old, was buying a €540,000 property in the Portes du Soleil region of the French Alps. He had enough capital to put upfront in order to reduce the duration of the loan but wanted to keep this capital available.

By taking a 25 year fixed rate mortgage at 2.90% on a repayment basis, the client was able to know exactly what he would be paying each month as he nears retirement and could therefore arrange his other finances and investments to suit this plan.

Area Guide: Cannes

On the coast, glamour is well established, but venture inland and Cannes also becomes a true southern village where you can get lost in streets or in the trails of picturesque stairs, before going back for 3D thrill on the Croisette.

If you strip back the glitter and red carpets you can imagine Cannes I the early days. It was the world capital of cinema (a hotly contested claim these days) and the most important city of the Alpes-Maritimes department, one a handful of places from which you could travel to places like Grasse or Saint Paul de Vence.

Apart from late May, the time of the world famous film festival, or one of the many conventions which happen each year, booking a hotel in Cannes is facilitated by the density of hotel stock. In addition to the five ‘palace’ distinction hotels on the Croisette there are 22 four-star hotels and hundreds of others too.

As for shopping, Cannes is often viewed to be an extension of Paris’ renowned Faubourg Saint-Honoré, a mecca of high fashion, jewelery and interior decoration. From the charming boutiques of Rue d’Antibes to the more affordable shops on Rue Meynadier, brands and products are everywhere.

Even with exhibitions and shopping topping the list of things to do in Cannes, one should not forget swimwear. Sunny weather and seven kilometers of sandy beaches that stretch to the Esterel Lerins Islands are a temptation that is hard to resist.

But Cannes is also Provence. The intoxicating smells of thyme, verbena and basil can be feasted upon at the Forville market, which showcases regional products and is a true invitation to southern gastronomy.

Transportation and travel…

Cannes is perfect for a pedestrian stroll, but if you have sea legs, boats from different companies liaise with the nearby islands, like Sainte-Marguerite and Saint-Honorat. In season, these boats even head up to the Corniche d’Or, Saint-Tropez or even Monaco.

Where to go…

The old quarter, Le Suquet, and the square tower of the medieval castle of La Castre, with its view over the bay, are not to be missed. For movie lovers, enjoy your trip to Cannes by walking up the steps of the Palais des Festivals. Frenzied applause will need to be supplied by your compatriots.

Trendy and traditional bars abound in Cannes and you will not be short of choice. At the stroke of 10 o’clock ten different clubs open their doors across the city.

Commercial property reaches new heights for investors

France’s tallest skyscraper has been purchased by the real estate subsidiary of the global insurer Axa.

At 231 metres and housing over 80,000 square metres of office space, La tour First has been a feature of the Paris skyline since it opened in 1974. The repurchase was conducted with two subsidiaries of the owner, the US investment fund Beacon Capital Partners, via a “share transfer transaction,” said Axa IM in a statement.

According to a source close to the case, the transaction is around 800 million euros and the investors are looking a more leading real estate assets in Europe. It demonstrates “the prospects offered by the Paris office market,” said Pierre Vaquier, CEO of AXA IM – Real Assets, said in the statement.

The building was renovated to the tune of EURO 300 million between 2007 and 2011 and currently leased to two large international companies, the audit firm Ernst and Young and the credit insurer Euler Hermes.

Real Estate: declining prices injects value in to the French property market in 2016

When it comes to securing French property, 2016 could be the year to pick up a bargain or two.

Prices have been steadily declining in recent months and economists at Credit Agricole are expecting a slightly less ‘dynamic’ housing market in 2016, due mainly to a mooted rise in mortgage rates.

However, property experts more widely are predicting a favourable year. A market correction in 2016 that will result in stabilising prices and in the meantime the price drop means value for money in the market right now.

According to a CSA poll for the Land Bank, 67% of property experts say they are optimistic about the market compared with 35%. Credit Agricole expect transaction volumes to remain high, although slightly down, about 5% on resale homes.

Of course economists are cautious. They cite a number of factors that could impact on the wider French economic recovery which would affect the property market. Growth is predicted to remain fairly low at 1.2% and unemployment whilst high, is stable. Then there is any additional borrowing by the French State, which will automatically increase mortgage rates.

Paris launches operation against ‘illegal’ rental properties

Just a few months after the city of Paris organised an operation against illegal furnished tourist rentals in the ‘Le Marais’ area of Paris, another a similar operation in the 1st and 6th districts has been announced, with the support of the mayors of these two districts.

Meanwhile officials also announced that the city of Paris was to develop new ways to optimise the regulation of furnished tourist rentals, including additional staff ‘controllers’ and stronger penalties for the owners do not respect the law.

Whilst Parisian owners can legally rent their residence when they’re not there, in most arrondissements, because their property is therefore becoming a furnished rental property, they must ask for permission from the local municipality.

Officials have stressed the need for collaboration with the cities of Madrid, New York and Barcelona, ​​which are also affected by this issue of illegal furnished tourist rentals.

With some 50,000 properties in Paris available for rentals it is the worlds most popular destination on the Airbnb website. Whilst this is great for the tourism sector, in terms of social diversification there is a small problem. It means that in some districts of Paris the Airbnb renters outnumber the people.

For example, if you count the number of Airbnb guests who have stayed in the summer of 2014 in the 3rd and 4th Arrondissements, you get a total of 66,320 people. A very high figure, when compared with some 64,795 inhabitants in the (according to figures published in 2012).

Of course there is a seasonal balancing to consider here as the number of tenants Airbnb potentially relayed was during the two summer months.

December 2015 – French Mortgage Transaction of the Month

Just like this month’s area guide, our transaction of the month takes us to Chatel in the Les Portes du Soleil. Here a client wanted to utilise the value currently available across the mortgage market to suit his own long terms plans.

On a property value of around €530,000 the client opted for a split mortgage across two loans; one variable at +1.90% above the 3 month Euribor (after being fixed at 2.5% for three months), with the other half on a repayment mortgage.

Most clients opting for such mixed finance arrangements are do so when they plan to pay a bulk of the loan off early. Variable mortgage products are much more flexible for such a purpose, but of course do not come with the same levels of security over the rates long term, hence decision to choose a mixed mortgage. Overall the loan to value here was around 80%.

French property selling prices remain reasonable

The barometer of price differences between the initial amount and the amount of the actual transaction now remains at a low point: 4.5%. Launched in April, this new price barometer had shown continuous decline throughout the year, down from a point where the actual selling price was much lower than the asking price.

Today, a house or apartment in France is sold on average 4.5% less than asking price or price displayed on the seller’s real estate ad. Across the country, real estate is offered for sale at an average price of €210,070 with the average final selling price now standing at €200,590.

Only two cities exceed the average price differential (Nice to 5.25% and Nantes to 5.3%) and therefore one can deduce that the figure is higher in smaller towns and rural areas.

Minimum deviations occur in Paris and Lyon

As for the specifics of the different cities studied, the figures show that properties in Paris and especially Lyon are sold very close to the displayed price, with only 2.55% differential in the capital and a tiny 2.15% in Lyon. Lyon’s differentials are also very consistent regardless of the type of housing (the differences are between 1.9% for a 3-bedroom property and 2.5% for a studio).

Bordeaux is the city that has the biggest disparities, with 1-beds selling for less than €2,020 than the list price (-1.3%) and up to €38,905 (-8.7%) for 4-beds or bigger.

Area Guide: Châtel, Les Portes du Soleil

This relatively small-sized farming village in the Portes du Soleil ski area has attracted huge amounts of international buyers this year.

We’ve heard lots of different reasons why Châtel has been the resort of choice this year. The recent investments in lift infrastructure have almost always been mentioned. But the best one was from a chalet buyer who said the moment at which he knew Châtel was the right resort for him, was when he came face to face with a long time inhabitant.

He was walking through the centre of the village during summer and as he past an old-style mountain chalet a cow poked its head walked through the centre of the village. For with Châtel, even though it is becoming a popular mountain resort, its true Savoyard character hasn’t been lost.

In fact it was the way in which Châtel was left behind by its neighbours that has today helped its cause. Morzine and Les Gets grew very quickly throughout the 90’s and early 2000’s, and whilst this means they now boast lots of family friendly infrastructure and accommodation, some argue their character has been lost along the way. By the time Châtel was being eyed up by international buyers the town had very strict rules in place over the construction designs of property.

This means that today Châtel stands tall. It’s a resort that is just 80 minutes from Geneva Airport, is part of the enormous 650km Portes du Soleil domain, boasts beautiful picturesque scenery and has recently received lots of infrastructure investment. Very few resorts can talk of such superlatives honestly and especially at a price per square metre of between €6,000 to €8,500.

As with most mountain villages, Châtel can be broken into different areas. The village centre with its ‘Super-Châtel’ telecabine is the busiest area and has lots of wonderful cafes and restaurants. There is a disco in Châtel, although if late-night après-ski is important, Châtel probably isn’t the right resort for you.

To the west you have the areas of Petit Châtel, which are largely residential and to the east you have Lac du Vonne. It is here where the recent ski lift was placed, linking the Linga ski area with the slopes at the top of the Super-Châtel telecabine. This new lift, which opened in early 2015, dramatically reduces the time it takes to reach Avoriaz and negates the use for a ski bus too.

The other main investment over the last year or so was the new aqua centre in the centre of the resort. Unlike most spas across the Alps, the entrance fees here are refreshingly low at under €9 per adult and €26 for a family for four.

Paris wants to quintuple the surcharge on second homes

The mayor of Paris voted yesterday for a sharp rise in housing tax for second homes, asking that this increase be registered and passed by Parliament in the draft budget coming at the end of the year.

The proposed increase from the current 20% mark which has been in place since 2015 is of 100%, but only for “tension zones” namely Paris, the French Riviera, the Côte Basque, etc. This new rate would include some 90,000 second homes in Paris.

The measure, which generated €21 million in receipts in 2015 could generate an additional €70 million, but is more being seen as a way of pushing the owners to rent or sell their property so they can be inhabited.

According to electoral stats, the majority of these second homes are located in the most residential districts, between the 1st and 8th arrondissements of Paris.

A controversial surcharge

Effective from this year the 20% countrywide surcharge on second homes has not achieved its original objective, which was to encourage owners of vacant property to sell or to put on the rental market. One might think that this was because second homeowners can often swallow such an extra cost, but in fact it did not even get to that stage.

French municipalities were given the choice of whether to impose this extra tax and in the end only 98 out of a 1200 applied for the 20% increase. Locations with strong tourism demand were of course among those who applied, such as Paris, but also Toulouse, Nantes and Montpellier.

Most municipalities in the south adopted the tax, with more than a quarter of the identified towns located in the Alpes-Maritimes (Antibes, Le Cannet, Vence …). 16 Haute-Savoie municipalities have also decided to apply the surcharge. However with only 8% of municipalities opting for the application of the, the general consensus is that the government has fallen short of its goals.

French real estate: transactions are concluding faster

New figures from ‘Orpi’, the network of estate agencies across France, indicates that the purchasing power of buyers has grown with the sale duration reducing. The network says that 50% of its apartments and 54% of its homes were sold in less than 60 days in 2015 with vendors and buyers becoming more reasonable with sales prices.

In addition to buyers “returning to reason” other factors have also been taken into account. ‘Household morale’ is one, government incentives giving people a leg up onto the market are also helping, but overall it is the improved mortgage rates and lengthened loan durations that helping the most.

“Since 2011, the decline is equivalent to a decrease in housing prices of 16%. It is three times more powerful than the fall in property prices”, stated Michel Mouillart economist specializing in real estate.

The slight increase in mortgage rates during the summer also had a strong psychological impact on people’s ability to buy.