The prime residential property market in Paris is recovering from several years of muted performance which have left prices in the city significantly lower than its global rivals.

A new political regime, historically low interest rates and building consumer confidence have helped the property market to turn with prices up by 5.8% in the year to May 2017, the latest research shows.

Indeed, prices in the 1st, 4th and 5th arrondissements have already exceeded their 2012 peak and this recovery is being driven by domestic demand, according to the latest analysis report from international real estate firm Savills.

Foreign buyers accounted for just 9% of the prime market in 2016 for sales above €1 million, and although this is down 14% from 2008, Savills expects overseas buyer numbers to grow in this sector. They already account for around half of buyers in the ultra-prime segment.

‘The new Government will bring clarity on legislation and a period of relative stability. This could encourage foreign buyers who have been waiting on the side lines to act,’ the report says.

It points out that the Macron Presidency is regarded as positive for the market and its pro-business stance could buoy economic growth while the Paris region benefits from a diverse economic base that generates 31% of France’s total GDP.

Paris also offers value for money for overseas buyers. For example prices in the prime market are 32% below those of the prime property market in London.
Sales across the whole market are up 23% in the year to May 2017 and the report explains that the prospect of interest rate rises has encouraged buyers to close deals at a time when stock levels have fallen.

In the first quarter of 2017, prices stood at €8,450 per square meter across the whole market and leading indicators from the Notaires suggest prices reached €8,800 per square meter in July 2017, representing an annual price growth of 7%.

In the prime market, prices have grown from a 2014 low, averaging between €12,000 and €17,000 per square meter, depending on the area and the quality of the property while exceptional properties are selling for between €20,000 and €30,000 per square meter.

When it comes to who is buying what, the report says that as Paris is a city characterised by apartments of the Haussmann era, with limited new development, modern buildings with high levels of services and amenities as favoured by wealthy international buyers are relatively rare.

Pied-à-terre, larger apartments and mansions are sought after by French buyers and wealthy international buyers. Family apartments are sold mainly to the French. But some overseas buyers seem to have been put off by recent terror attacks. For example American buyers, who currently benefit from a strong dollar, dropped from 21% of foreign buyers in 2015 to 16% in 2016, and security concerns may be having an effect, the report suggests.

Other Europeans are the largest single foreign buyer group at 39%, led by the British, Swiss and Belgians. Buyers from the Middle East and Asia are present in small numbers. The Chinese, a huge tourist group, have yet to make their mark as buyers in Paris.

‘Emmanuel Macron, the French president, and his commanding majority Government, should mean a period of stability for the Parisian residential market. Reduced political risk in Europe coupled with pro-business reforms could result in renewed economic growth and stimulate the residential markets,’ the report says.

It also shows that as a result of landlord restrictions, rental growth has been largely flat in the last five years in Paris. Rental yields now stand at 3% for prime property, just below London and New York.

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