September 2022: The state of the luxury real estate market
Paris - Western suburbs - Provence - Saint-Tropez - Deauville - September 9th 2022
While the evolution of the real estate market is the topic of much discussion in the media, what we are witnessing in the segments in which we operate does not always correspond with what we read and hear.
We therefore felt it appropriate to once again share our observations, as we did at the end of the first quarter of 2022, by comparing the number of transactions achieved by our agencies in three price ranges (transactions at prices between 750,000 and 2 million euro, at prices between 2 and 3 million euro, and at prices in excess of 3 million euro), over the period spanning May to August for the years 2019 (pre-pandemic), 2020, 2021 and 2022.
The reference year (index 100, regardless of the price segment considered) is 2019, the last before the Covid-19 pandemic and an excellent year for the Parisian real estate market.
Taking into account our share of the market (*), our observations should fairly faithfully reflect the situation at the top end of the latter.
(*) In 2021, our Daniel Féau agencies achieved:
- 26% of all Parisian sales at prices in excess of 2 million euro, i.e., 2.812 billion euro*,
- 42.4% of all Parisian sales at prices in excess of 4 million euro, i.e. 795 million euro*.
Each year, Daniel Féau also sells between 600 and 700 apartments at prices ranging from 500,000 to 2 million euro.
* Source ADSN-BIEN – Chambre des Notaires de Paris/Ile-de-France - for 2021
TRANSACTIONS AT PRICES BETWEEN 750,000 AND 2 MILLION EURO IN PARIS AND THE NEIGHBOURING WESTERN SUBURBS
The general trend:
During the second quarter of 2022, the number of sales achieved by our agencies in this segment which had been stable since the end of lockdown and at a level close to that recorded in 2019, increased significantly by over 30%.
The number of assets for sale, which had increased sharply in 2020, fell below its 2019 level.
Regarding the most keenly sought-after assets:
- Irreproachable assets with an outdoor area continue to sell quickly, and prices are rising.
- The sale of otherwise irreproachable assets not benefiting from an outdoor area are generally stable and at a high level.
- Concerning assets with defects (lower floors, noise pollution, lack of clarity), the marketing period is longer and prices are dropping slightly.
Regarding the state of mind of buyers:
- French buyers, anticipating an increase in credit rates in the coming months as well as a period of inflation
over the next few years, are tempted to “maximize credit” as quickly as possible.
In addition, high multiples and volatility in the equity market is encouraging them to favour real estate in their personal asset allocation.
- After many long months of absence, foreign buyers, and particularly those from the USA and Switzerland, are back in force and determined to benefit from a parity of the Euro with their own currency which currently is clearly to their advantage.
Paris 6th - Notre Dame des Champs - A 242 sqm apartment - 4 bedrooms - Sold in July 2022 - Guide price: €5,400,000
TRANSACTIONS AT PRICES IN EXCESS OF 2 MILLION EURO IN PARIS AND THE NEARBY WESTERN SUBURBS
In the luxury and ultra-luxury segments, activity remains at a sustained level.
The number of sales signed during the second quarter of 2022 increased by:
- 19% for sales at prices between 2 and 3 million euro when compared to 2019’s excellent second quarter,
- 41% for sales at prices in excess of 3 million euro when compared to 2019’s excellent second quarter.
These results are however down on those we observed in the second quarter of 2021; nonetheless, potential French buyers are numerous and highly motivated, and international buyers are once again back in the market.
A lack of stock rather than a drop in demand is the cause of this decline in the number of sales when compared to the second quarter of 2021. Over the past 24 months we have sold a significant number of assets, and as a result supply is more limited. In other words, regarding the luxury and ultra-luxury segments of the real estate market, few assets are currently for sale and what characterized the year 2020, that is to say the increase in the number of apartments and private mansions on the market, is today well and truly a thing of the past.
The real estate market in Paris remains therefore pretty much as we are used to; i.e., a market in which demand exceeds supply.
Paris 16th - Avenue Foch - A 198 sqm apartment - 3 bedrooms - Sold in July 2022 - Guide price: €4,200,000
LUXURY REAL ESTATE IN THE SOUTH OF FRANCE AND DEAUVILLE
As far as quality assets are concerned, in the markets in Aix, the Alpilles, the Lubéron, Saint-Tropez and Deauville, the inventory of assets for sale is also at a very low level.
If the number of sales is slightly down compared to last year for our agencies located in the provinces, this is in no way due to a drop in demand: the markets in the South of France and on the Normandy coast are also experiencing a real shortage of luxury assets for sale, even more so than in Paris and the sought-after western suburbs.
Luberon - Goult - A 600 sqm property on a 14 hectares park - 10 bedrooms - Sold in august 2022 - Guide price: €3,295,000
ROUNDING UP AND LOOKING AHEAD
Whatever the market segment considered, the number of sales is clearly on the increase when compared to 2019, which was itself an excellent year: the real estate market is therefore extremely dynamic – particularly for sales of assets at prices in excess of 3 million euro, which increased by no less than 41%.
The stock of quality assets currently for sale is low, regardless of the sector, which naturally impacts on the number of transactions, although not on prices overall:
- Perfect assets with outdoor areas continue to sell very quickly, with prices on the increase.
- Prices for otherwise perfect assets not benefiting from an outer area are generally stable, and at a high level.
- Concerning assets with defects (lower floors, noise pollution, lack of clarity), the marketing period is longer and prices are slightly dropping.
With the French seeking to borrow, and foreigners seeking to take advantage of the weakness of the euro and benefit from a subsequent increase in their purchasing power, demand remains sustained.
Given the low stock of assets immediately for sale in the luxury and ultra-luxury market, it is difficult to see how the number of transactions could maintain the very high levels observed since the beginning of 2021 (more than twice as many transactions in 2021 compared to 2019 at prices in excess of 3 million euro). Similarly, we see no reason for prices to fall, at least as long as the weakness of the euro reinforces the purchasing power of an international clientele once more in the market for luxury and ultra-luxury real estate.