When a 44 million-euro ($59 million) Parisian townhouse near the Champs-Elysees was snapped up just six weeks after it was put on the block, Charles-Marie Jottras knew the city’s luxury property market was turning around.
The chairman of broker Daniel Feau, an affiliate of Christie’s International Real Estate, says the firm found a Qatari buyer for the 19th-century mansion that features a dozen bedrooms on three floors, a terrace with a panoramic view of Paris, a swimming pool and a 1,000 square meter garden.
The re-emergence of buyers from the Middle East, the U.S. and Russia together with a more than 10 percent drop in prices in a year is rekindling sales of multi-million-euro properties in the French capital. The market faced a glut after wealthy French people, including actor Gerard Depardieu, sought to offload properties as they left the country, fleeing Socialist President Francois Hollande’s efforts to add to already high taxes since his May 2012 election.
“We really had 12 dreadful months between April 2012 and April 2013,” Jottras said in an interview. “Then the market woke up nicely thanks to falling prices. Foreigners are looking at France anew because they’ve realized that, at the end of the day, the tax hell is for us, not for them.”
While Paris notaries figures show the number of apartment sales in the capital in the first half of 2013 was 22 percent below the average of the past 10 years, such transactions rose 5 percent in the second quarter from a year earlier.
Depardieu’s Exit
Hollande unveiled 30 billion euros of new taxes for 2013 on companies and households -- including asking employers to pay a 75 percent tax on employees’ earnings of more than 1 million euros -- as he seeks to shrink a budget deficit that was 4.8 percent of the country’s gross domestic product last year.
At the end of 2012, Depardieu, who won the Golden Globe award for the best actor in 1991 for his performance in the movie Green Card, became the most high-profile tax exile, moving to Belgium before taking up a Russian passport in January.
He put his 19th-century hotel de Chambon mansion in central Paris up for sale, adding to the inventories of such properties listed for sale.
The total value of Daniel Feau’s listing swelled to 5.4 billion euros in the first quarter, up 42 percent from a year earlier, and has “slightly” trended lower since, Jottras said.
Barnes, another luxury-property broker, has 1,250 listings of more than a million euros in Paris and the nearby Yvelines and Hauts-de-Seine counties, twice as many as 18 months ago, according to its President Thibault de Saint Vincent.
‘Quality Products’
“We’ve never had so many quality products on the market in Paris,” Saint Vincent said during a visit to a 425 square-meter duplex apartment in western Paris.
Once home to fashion designer Pierre Balmain, the apartment had been renovated with gold-plated dining-room walls, Indian and Brazilian marble in the bathrooms of its four suites and carries a price tag of 12.9 million euros.
“People are leaving for a number of reasons: taxes, the economy, family,” Saint Vincent said. “One never knows whether tax laws are definitive or whether they will worsen.”
Those concerns have hurt Paris property prices, which fell more steeply in the capital city’s most affluent areas.
In the chic Saint-Germain-des-Pres and Champs-Elysees areas, Paris’s priciest, average apartment prices fell 18 percent in the second quarter from a year earlier to just over 12,000 euros a square meter, according to notaries and national statistics office Insee. In the Ecole Militaire district near the Eiffel tower, they fell 11 percent to 10,510 euros.
Beats London
That compares with the 3 percent average price drop in Paris from the August 2012 peak, after they trebled since 2000.
The drop lured to the City of Light buyers not only from China to Russia but also Middle-Eastern investors escaping unrest in countries from Syria and Egypt to Libya and Tunisia.
“We’ve really seen an influx of foreign buyers snapping up properties, especially in western Paris,” said Alexander Kraft, Chairman of Sotheby’s International Realty for France & Monaco. “They’ve seen that prices in France compared to other major cities such as London, New York, Hong-Kong are still comparatively affordable.”
Prices in London’s upscale Knightsbridge and South Kensington are about 20,000 euros per square meters, and start from 15,000 euros for “something decent” on Lexington avenue in New York’s Upper East Side, compared with about 10,000 for similar properties in Paris’s 16th arrondissement, Barnes’s Saint Vincent said.
Americans Return
American showbiz personalities and executives of technology companies, who may have steered clear of the Paris property market following the drop in the dollar in the early 2000, are also coming back, he said.
“Americans have come back at all sorts of price levels,” said Marie-Helene Lundgreen, director of Daniel Feau’s international department Belles Demeures de France, during a tour of a private mansion that’s up for sale in a gated community near the Arc de Triomphe. The mansion includes an indoor swimming pool and a guest house, and is for sale at 33 million euros.
“Some have budgets of 30, 40 or even 50 million euros,” Lundgreen said.
One of Paris’s most expensive estate on Sotheby’s listing is a 75-million-euro mansion of 3,200 square meters with a swimming pool and a sauna in the basement, 2,000 square meters of gardens and a roof terrace.
Below Average
The layers below the top-of-the-line properties, meanwhile, have been hit hard as the market has been damped by an increase in the capital-gains tax on second homes, increased levies on vacant properties, tightened requirements for tax reductions for buy-to-let investments and a planned law that will cap rents.
“Since the presidential election last year, the market for normal luxury apartments of between 1 and 3 million euros has totally crashed,” said Sotheby’s Kraft. “Really wealthy Parisian families either completely left the country, or said: this isn’t the time to buy, I’m going to lay low.”
As falling housing transactions hurt government tax receipts, Hollande on Sept. 1 introduced a break on the property capital-gain tax to revive sales.
“Since September, the market for this normal luxury property is beginning to revive a little bit,” Kraft said.
‘More Interesting’
Residents who’ve remained in France are enticed by near- record-low borrowing costs and price drops affecting apartments that need fixing-up the most, Jottras and Saint Vincent said.
A 260 square-meter apartment in the Trocadero area with a view of the Eiffel tower needing to be fully renovated took seven months to sell at 8,450 euros a square meter, while it may have fetched 11,000 euros 18 months earlier, Saint Vincent said.
“What we’ve seen in the past three to four months is that when we are able to close a transaction, the difference between the asking price and the closing price will at least be in the order of 15, sometimes 20 percent,” Kraft said. “Really it’s a buyers’ market.”
And many of them are coming from outside France. Foreigners accounted for 7.7 percent of housing purchases in Paris in the first half, inching toward the record 8 percent in 2003 and 2008 and up from 7.3 percent last year, according to Paris notaires.
That might slowly start to stabilize prices in the French capital, said Jottras.
“The price drop is probably poised to be halted,” he said. “Still, the market isn’t turning bullish.”