Parisian luxury real estate market in the context of the pandemic in 2021

Market Report - Paris, December 14th 2021

Although according to notaries the average prices per square meter in 2021 remained stable in Paris, they have increased by 3.5% in provincial towns and up to 7.5% for country houses and coastal properties.

Many have suggested that Paris has fallen out of favour, and that to some extent the provinces are getting their “revenge”.

Could it be that simple?

Our sales in 2021 (compared to those in 2019, a record year) show a somewhat different evolution in buyer behaviour, and particularly for luxury assets. Taking into account Daniel Féau's market share at prices in excess of one million euro (1) our observations no doubt reflect the reality of the market.

(1) In 2019, pre-pandemic and before the very significant increase in our sales in 2021, our Daniel Féau agencies concluded 27 % of all sales in Paris at prices between 2 and 4 million euro, and 42.9 % of sales in Paris at prices exceeding 4 million euro (market source : notaries)

 

The parisian market (Paris and Neuilly) in a few numbers - Comparison between 2021 and 2019 (a record year, and pre-pandemic) - Sales achieved by Daniel Féau and Belles demeures de France

 

- A particularly dynamic market, as confirmed by the evolution in total sales in the capital: + 39% in comparison with the record year 2019

  
- An increasingly dynamic market as prices increase:
    -> Total sales <2 M€ : stable when compared to 2019, a record year
      -> Total sales at prices between 2 M€ and 3 M€ : + 21%
      -> Total sales > 3 M€ : + 120%
  

- A yearning for outdoor areas stronger than ever before: 
    -> Total sales - apartments : + 22%
    ->Total sales - single-family houses and private mansions with gardens: + 186%
      -> Sales of single-family houses and private mansions have almost tripled, counting for about 50% of the aforementioned increase.
 

- A clear wish for more space: Daniel Féau sales in Paris and Neuilly classed by surface area, 2021 vs 2019

- Transactions at higher prices :
    -> Sales at between 1 and 2 M€ : 13 940 €/sqm
      -> Sales at between 2 and 4 M€ : 16 724 €/sqm
      -> Sales> 4 M€ : 20 749 €/sqm

A succinct analysis

 

The market for "standard" family apartments - that is to say offering under 150 sqm of living space, on an intermediate floor, without the bonus of a view or a terrace, and typically 3-bed - has not kept up with the boom in demand for top-of-the-range assets; transactions have maintained their momentum of 2019 (a record year), but we have not observed a surge in activity.

Apartments of this type (particularly those not benefiting from a terrace) are currently remaining on the market slightly longer than before, despite traditionally being those for which the imbalance between low supply and high demand was the most striking.

Potential clients concerned by these apartments seem to be adopting a wait-and-see attitude, which may well explain the stability of prices per sqm announced by capital’s notaries this year (taking into account the high number of apartments in this segment as well as those at prices inferior to one million euro in the capital’s market).

In the top-of-the-range segment, however, French buyers have not only replaced but surpassed international buyers.

We are of course seeing French citizens returning from post-Brexit London, but they are also from coming back from Europe, the Arabian Gulf and the Far East, and in particular owing to restrictions linked to the pandemic. 

The majority of buyers, however, remain French residents.

Talking to our French customers, three major reasons are evoked that may explain this current substitution of French buyers for international customers for luxury assets:

- The necessity to benefit from an outdoor area. Successive lockdowns have no doubt led to the explosion in demand for single-family houses and private mansions with gardens, as well as apartments with terraces.

- The “safe haven” dimension of real estate, more so in the current context than other assets; historically high EBITDA multiples for equities and historically low rates for bonds and other interest rate products.

- But above all, a desire to allocate a larger portion of one's wealth to the place where one lives every day rather than investing in other assets.