Hello and welcome to the Laroche Groupe Paris Properties 4th Quarter Paris Market Update! In this analysis, we will walk you through where the Paris market ended up at the end of 2023 and also look into the projections for Q1 of 2024.
In a nutshell, all of the inflation-lowering measures taken by the Central European Bank have had the desired effect: France’s inflation rate dropped to 3.1% as of January 2024. That’s good news indeed. However, the blunt instrument used to achieve this result has been the tripling of interest rates in a period of 18 months.
Similar to the dynamic playing out in other countries, buyers have seen their purchasing power reduced by 25% while current owners who normally would be trading up or down-sizing are staying put because of the comfort of their low-interest-rate loan locked in prior to 2022.
Low demand + low inventory = lower sales units and lower prices for those who do sell.
At the end of 2023, within the context of the Greater Ile de France region, sales transaction volume in Paris was slightly more resilient, especially when compared with the running 10 year average: -22% in closed sales units compared to 2022 and -6% compared to the average of the last 10 years.
The price per m2 of Paris apartments stood at €9,770 in Q4 2023, down -6.8% in one year. The annual decline in apartment prices could reach -8% by April 2024, bringing prices back to summer 2018 levels (€9,400 per sq.m).
According to pre-contracts, the annual decline in prices is set to intensify in the coming months, with prices down 13.4% from their November 2020 peak.
Prices per m2 for existing apartments in Paris by arrondissement in Q4 2023:
Prices per m2 range from €7,930 in the 19th arrondissement to €13,840 in the 6th (1.75 times more expensive than the 19th). 5arrondissements, located on the eastern outskirts, are now at less than €9,000 per m2, compared with 3 in the previous quarter.
Annual change in price per m2 for existing apartments in Paris by arrondissement in Q4 2023:
13 Paris arrondissements report annual price declines of over 5%. Annual price declines range from 2.8% in the 8th arrondissement to 12.1% in the 13th. The steepest declines are mainly in the least expensive arrondissements on the eastern outskirts.
While the projections for April and perhaps the 1st half of 2024 see continued price adjustments and slow sales, the conditions are good for a 3rd and 4th quarter stabilisation as the Central European Bank has already begun to ease the maximum lending rate and will continue cuts throughout 2024, giving buyers some of their purchasing power back and getting more inventory into the market.
Focus: Nationalities of foreign buyers in the Paris region:
Buyers who do not reside in France at the time of purchase are buying more and more apartments in Paris. The previous focus showed that the number of non-resident foreign buyers remained stable from 2022 to 2023 (1,180 and 1,250 acquisitions respectively for the first 9months).
They benefit from high purchasing power, often buy a pied-à-terre and can do so without a mortgage. As a result, they have not been as sensitive to the economic downturn as other clienteles. As the market as a whole has contracted sharply, they have become proportionally more numerous (from 0.8% to 1% of total sales), while remaining a micro-market.
These foreign buyers living outside France have a confirmed preference for the capital. 68% of them chose to invest in Paris in both 2022 and 2023, versus 49% in 2021 and even fewer in previous years. Only the Hauts-de-Seine region has managed to attract more than 10% of these transactions, with no other region exceeding 5%.
This refocusing of demand in the heart of the urban center naturally benefits apartments, and the share of single-family houses in these transactions has fallen to 5% in the last two years, from 15% in to 2021.
Confirmation of the return of the Americans and a clientele from an increasingly wide range of countries
Buyers from the USA account for a quarter of all purchases by non-resident foreigners in Paris. Their purchase budget of €715,000 is twice as high as that paid by French residents, as they buy mainly in the capital’s central districts, where prices are highest. The second most represented country is Lebanon, with 90 Lebanese buyers, ahead of Italy (70) and Germany (45).
A record 62 nationalities are represented, one more than in 2022 and 15 more than in 2021, confirming the diversification of buyers in Paris in the post-Covid period.
Portuguese and Chinese buyers are still the most numerous among foreign buyers residing in France at the time of purchase
Foreign buyers residing in France are proportionally slightly more numerous (10% for the first 9 months of 2023 versus 9.2% for the first 9 months of 2022), but like the vast majority of buyers, they have been penalized by the difficulties of accessing credit and the decline in their purchasing power.
The Portuguese remain the leading foreign buyers of homes in the Greater Paris region, accounting for 13% of this category and 1,470 purchases in 2023. They are particularly attracted to houses, which they choose in 45% of cases. The Chinese are the second most represented nationality, with a very strong preference for apartments, which account for almost 90% of their purchases.
In fact, the proportion of Portuguese buyers has fallen significantly over the years, accounting for 18% of resident foreign buyers in 2019. The share of Chinese buyers is stable at around 10%, closely followed by Algerians, Tunisians and Romanians.
Summary:
Paris remains a very dynamic market that has become even more attractive for a wide range of overseas buyers and specifically Americans. With currency exchange rates remaining favorable and significant negotiating leverage as a buyer (especially with cash offers), now is a really great time to be looking at property in Paris. Reach out and start a conversation with us.
Sincerely,
Aaron
