Paris Real Estate Update – Interview With Our Resident Expert

Here at Paris Perfect, we try to stay one step ahead of the real estate market so that we can continue offering the best properties to our clients and guests. Thanks to the knowledge and decades of experience of our founder Maddy, we have helped dozens of Paris property owners find the pied-a-terres of their dreams!

If you’re considering dipping your toes into Paris real estate, you will want to get acquainted with the state of the market first. Below are a series of questions that a prospective buyer should be interested in for 2017, all answered thoroughly by Maddy herself.

If you’d like to learn more about how we can help you become a Paris property owner, take a look at this page for lots of helpful information.

Q: Maddy, what is the story regarding French property prices at the turn of the year?

The latest figures show that 2016 was an excellent year for the capital’s property market, which built on the recovery of 2015 – after a stagnant market since 2012. Transactions were up in the suburbs (Île-de-France) while Paris itself saw a slight fall.

Q: Why were transactions slightly down in Paris last year?

I wish it were due to lack of interest, but it was down to a lack of good properties: inadequate supply. There just simply weren’t enough good properties, which meant prices moved upwards.

Q: Could you tell us the number of transactions in the Île-de-France and Paris specifically?

In Île-de-France (the Paris region) as a whole, a total of 161,140 existing properties were sold. This was an 8% increase over 2015. Of this, around 2/3 of the sales (110,000) were apartments and 1/3 (50,000) were houses. As you move further from Paris it’s possible to buy actual houses.

However, in Paris proper the number of transactions fell in 2016 – from 34,390 to 34,030. The graph below shows that there were 360 less transactions (Nb. de ventes annuelles) than the previous year. Look closer and you’ll see that the market is still off the average of Paris’ ‘golden years of property, between 1999 and 2007, when transactions reached over 40,000 in each of two years.

As mentioned, the main factor behind this was the lack of adequate supply. There is little in terms of new build – while Paris’ aging infrastructure means many buildings need renovation and updating.

On a positive note, each of the last two quarters of 2016 saw a +3% increase in transactions over 2015, which bodes well for 2017.

Q: Tell us where prices went and where you think they’re going?

At the beginning of this year, the average price of an apartment in the entire Île-de-France rose to €5,430/m2, a 3.5% jump over the previous 12 months.

Paris alone is much higher, at €8,340/m2. This is comparable to any great city, which tend to be more expensive than the nearby suburbs.

See the graph below for an illustration of apartment prices over the last few years, including the projection for where prices will be by spring this year. The Notaires de Paris estimate an average of €8,520/m2, which would be a new record.

Q: How do prices vary by Arrondissement?

That’s an interesting question and requires a detailed answer. As mentioned, the overall average for Paris rose to €8,340/m2 — 4.4% higher than the end of 2015.

All except three arrondissements saw strong price growth over the year, with some performing more strongly than others. The map below shows average prices in each arrondissement at the start of the year.

The Notaires of Paris predict a record-breaking price of €8,520/m2 by April this year. This would eclipse the previous high set in 2011 (prior to the drastic falls seen in 2012 due to the Eurozone crisis and French presidential election). Should the market follow this course, April’s new record will represent a 3.8% increase year-on-year.

The La Tache apartment rental in the desirable 7th arrondissement

The most expensive quartiers remain the innermost circle of the escargot or snail of Paris.

The 6th arrondissement rose to € 12,200/m2

The 7th arrondissement was a close second at € 11,530/m2

The next 3 are within spitting distance of each other in terms of price:

The 4th arrondissement rose to € 10,920/m2

The 5rd arrondissement rose to € 10,730/m2

The 3rd arrondissement rose to € 10,690/m2

The 1st arrondissement is the last arrondissement to hit the € 10,000/m2 cut off.

Note: there are two important exceptions: ‘Les Îles’ or the river islands of Île St. Louis and Île de la Cité. They are in the heart of Paris and incredibly desirable. Prices are much higher than the 6th arrondissements on both islands. The average price is not a valid measure because the range is vast; for example a 200 m2 apartment on Ile St. Louis sold for €40,000/m2 last year.

Highest Growth

The map below shows the annual appreciation each arrondissement is enjoying, as of the end of the 2016. As you can see, the high fliers are the 3rd (+8.5%), 17th (+8.7%) and the 18th (+8.8%).

Other Important Trends

As shown in the graphic below, courtesy of the Notaires of Paris, the last 25 years have seen a shift in where the most expensive 10% of property transactions in Paris are to be found. The money has gravitated towards the centre of the snail. The most visible change is the migration from the 16th arrondissement, which has become increasingly less fashionable to a new generation of property investors and high-earning professionals.

Q: Why is Paris doing so well?

The first reason for the market’s resurgence is mortgage interest rates. They reached record lows of around 1.31% for 20-year loans in October and November, 2016 and have been slowly rising since then.

A rise was anticipated for a while, but the election of Donald Trump threw international markets into turmoil. France’s cost of borrowing doubled from 0.4% to 0.8% overnight, investors pricing in the extra risk when buying French treasuries. This has contributed to the rising interest rates we are now seeing, illustrated below in the little flicker at the end of a graph.

Average Mortgage Rates in France (%) © CSA/Observatoire du Credit Immobilier

In February, rates rose 0.1% from 1.39% to 1.49% for 20-year loans. These sorts of monthly rises are barely affecting the market as increases in transactions and prices are showing. February’s jump effectively added €20 to the monthly payments for a €200,000, 20-year loan. Far from enough to affect the market’s momentum.

This is because rates are still historically very low, and most mortgage brokerage firms and market observatories predict that the most they will rise to this year will be 1.7%, which would still be very low in the context of the last decade.

US Dollar Exchange Rate

Maddy helped a family find this gorgeous property within arm’s reach of the Eiffel Tower! We named it the Monthelie.

The best news of all? The US Dollar is at historic highs versus the Euro. Basically, that means it’s possible to buy an apartment in Paris for approximately 20% less than five years ago, even if prices didn’t change!

Overall, we believe good Paris real estate will continue to rise as values are solid and will continue to recover from the 2012 recession. Click here to read more about the 2017 Paris Real Estate market trends. If you’re interested in learning more about finding the perfect property in Paris, we invite you to explore our Paris Property Buyer’s Guide.

(Graphs and Charts © Notaires de Paris. Top image ©Georgianna Lane.)