PARISIAN REAL ESTATE DEFIES THE VIRUS

ANALYSIS OF THE REAL ESTATE MARKET IN PARIS

Many articles have looked into how the Parisian real estate market reacted during 2020.

It seemed interesting to us to share the evolution of the luxury real estate market as experienced in our agencies, and to hypothesize on what 2021 may have in store. This is particularly interesting as the changes in the market differ from one segment to another.

Sales at prices ranging from 1 to 3 million euro
  
Notaries and the FNAIM announced a drop in transactions of around 20% during 2020 compared to 2019 across the market in Paris.
 
We have indeed observed a decline in our sales at around this percentage for sales at between one and three million euro. However, months when we were able to “work” were very active, since the number and the total value of sales achieved over these months significantly exceeded the monthly average that we observed in 2019.
 
In this segment of the market, sales made by our agencies were at an average price/sqm of 14,893 euro in 2020 compared to 14,032 euro in 2019, an increase of 6.1%.
 
The demand for properties with an outdoor area – a terrace or garden – was very strong, which explains the remarkable increase in sales at both our Saint-Cloud agency (+ 54% with an average price of 1.520 million euro) and our Neuilly agency. Our Versailles agency, which opened in late spring 2020, also rapidly achieved sales.
 
Our Aix-en-Provence agency and, to a lesser extent, our chateau department also benefited from city-dwelling families changing their lifestyle and “heading for the countryside”. They have chosen to live in the provinces where they have a TGV station under 45 minutes away, a reliable Wi-Fi network and, if they have children, good schools nearby. Although these buyers however remain relatively marginal in terms of the number of sales, they nonetheless kept this segment of the market lively.

Sales at prices in excess of 3 million euro

 
In the capital and in this segment of the market, our agencies achieved in 2020 a sale every three days, which is equivalent to our results in 2019.
 
Characteristics of these sales:
- At prices ranging from 3 to 35 million euro, with an average price of 4.970 million euro,
- An average price/sqm of 18,667 euro compared to 17,091 euro in 2019; a 9.2% increase.
 
Although the luxury and ultra-luxury segment has been affected by the virtual disappearance of Chinese and American buyers who have not been able to come to France for many months, customers from the Middle East have been able to travel thanks to their private jets. European and French buyers – in particular those returning from the United Kingdom in anticipation of Brexit - have to a significant extent replaced our usual international customers, explaining the very good results in sales in the top of the range segment.
 
All in all, at prices in excess of 3 million euro our share of sales made to international customers fell from 42% in 2019 to 27% in 2020, a decrease of 35%. The proportion of French buyers rose to attain three out of four sales, an exceptional level in this market segment.
 
In short, the national clientele has therefore largely compensated for the absence of foreign buyers.
 
Moreover, taking into consideration visits to our websites by foreigners, it is clear that international customers remain drawn to Parisian real estate.

In conclusion, the capital’s “chic” districts are still keenly sought after by French and international customers. This was proven by the immediate and intense resumption of activity in our agencies as each of the two lockdowns ended. Given our market share (1), these figures probably correctly reflect developments we observed in 2020. They demonstrate a persistent appetite for real estate assets which are considered a safe haven in the current context of falling yields.
 
But above all these figures reflect the Parisian market’s structural imbalance. Supply - notably due to the absence of new build – is frozen while national and international demand remains strong. Under these conditions, we do not see how the shortage of supply could change in the short and medium-term, and demand is in no way on the decrease. This imbalance seems likely to persist and demand will most probably continue to largely exceed supply in 2021. The quality of its buildings, its rich culture and its beauty still make Paris one of the most sought-after capitals in the world.
 
With regard to our international network, Christie’s International Real Estate has observed contrasting developments in different cities. New York, Shanghai and Dubai in particular have experienced a more or less slight drop in prices per square meter, to a large extent because they have a significant supply of new or recent constructions. On the other hand, prices in Beverly Hills and Miami are rising slightly.
 

Charles-Marie Jottras
President

Nicolas Pettex-Muffat
General manager