Paris Property Prices Still Going Strong
As reported by the Chambre de Notaires, Paris
By Adrian Leeds

At the end of 2005, Paris had shown an average price increase of 14% for the entire year, compared to 14.7% the previous year, with some "arrondissements" (districts) appreciating as much as 18.5% (18th) and as low as 6% (6th). Prices continue on the upward movement, while we continue to hear predictions of the "bubble bursting." Sorry folks, we just don't see it happening...at least not for now.

Districts with the lowest appreciation are some of Paris' most expensive neighborhoods. The 6th (Saint-Germain-des-Prés) with the highest per square meter average of 7,412 euros only appreciated 6%. This plateau trend has been evident the last year or so. While rental properties here are non-risk, the cost of entry has gotten so high as to no longer be a value proposition. Le Marais, which has been on a skyrocketing upward movement for the last several years is showing slow downs with an increase of only 8.4% in both the 3rd and 4th (6,987 euros/m2 and 5,780 euros/m2 respectively). Again, we're seeing these districts begin to plateau much like the 6th.

One to watch is the 7th (Eiffel Tower). As Paris' second most expensive neighborhood, it showed gains of 14%. Couple that with a view of the Eiffel Tower and you'll have a winning property.

Buyers today are younger than ever and 92% of the sales are still by the French. The population of Paris is increasing as there are more smaller apartments sold for smaller households. Interest rates have risen in the last six months, property prices have increased well above salaries, so volume of sales is down, but only slightly and with these factors comes the prediction that the market will continue to slow down.

The dollar is decreasing in value and predictions for it plummeting further are in the news. This means that purchasing property will get more expensive, but owning it increases its value in dollar terms.

Simple math: buy now.

When visiting properties, remember a few important factors that help retain their values and keep them on an upward climb. Old and historic properties are always more highly valued than new with no intrinsic value. The districts with some of the oldest streets or remnants of Paris' past will never go out of style. Views are valuable assets, as are balconies and gardens, as well as fireplaces and lots of light. For apartments above the 2nd floor, an elevator can make or break the value, the rentability and resale capability. Green space nearby and access to transportation as well as commercial amenities will add big plusses.

Also, keep in mind that although the growth continues, the valuations published by the Chambre de Notaires are approximately 30% to 50% less than current market valuations.

There are several factors contributing to this variance. First is timing. There is approximately a 90-day period from the time an offer is made on a property until the time of closing. Thereafter, the numbers may not be reported until up to six months to the Chambre de Notaires. Secondly is the reduction in the purchase price, which can be attributed to direct payments made to the agent to help reduce notaire fees; listing of inventory of fixed furniture such as built-ins and appliances; and under-the-table cash transactions, which are illegal but do occur. Finally, the figures are diluted as they are reported by an arrondissement in its entirety and do not account for differences by neighborhoods. For example in the 18th arrondissement, a property in the heart of Montmartre near Sacre Coeur or on Rue des Abbesses can be sold for about 7,500 euros per square meter or more, while a property near Chateau Rouge or Max Dormoy, will be listed for about 4,500 euros per square meter.

So, how does this information help you as a buyer?

The trends for particular neighborhoods is extremely important if you're concerned about appreciation. That may not be your goal, if your property is an investment seeking to achieve high rental return, likely in areas of the city where appreciation may be lower than in others. For example, rental return is best in the 6th arrondissement, but your investment will be the highest and appreciation lower than the average. In contrast, appreciation is at an all time high in the 10th (Canal St. Martin, Gare de l'Est and Gare du Nord) where rental return is poor, but property is still low and more affordable.

We use the Chambre de Notaire figures more to help us understand the trends to use as a guidepost when researching properties. Do not consider these figures as absolute, otherwise, you may be disappointed to find that the market valuations are higher than your expectations and appreciation is lower.

Whenever our team of Property Search Consultants put together a portfolio of properties to visit, market comparables are analyzed to insure the buyer is paying a low or fair price for the property.