by Karl-Heinz Schabmuller

In a press communiqué of 10 June 2009, the French Broker association FNAIM has reported that real estate prices in France have fallen by only 0.2% whereas in April they increased by 3.0%.

In Paris, an average square meter of unoccupied residential real estate cost € 6,360 during the 1st quarter 2009. It fell by only 1% over the year and by 2.1% in comparison with the 4th quarter 2008. These numbers have been released by the Paris Notary Chamber in a press conference on 28 May 2009.

However, the notaries pointed out that the number of transactions has fallen significantly by 38.7% for old and by 66.9% for new apartments during the 1st quarter 2009.

Interestingly, prices in the “expensive” districts grew further, whereas they fell in the more “affordable areas”.

The notaries reported increases between 2% and 4,2% in the 4th (southern Marais), the 6th and 7th arrondissement (“left bank”) and shrinking prices between 4.5% and 5% in the 19th and 20th arrondissement which are located in the northeast of the City.

The latest official market numbers show that the Paris residential real estate market has so far much better resisted the global financial crisis than many other property markets around the world and analysts are now asking questions about the future and whether there will be a slump at all?

Beyond the developments in the overall economy which will in a large measure influence property markets in general, there is a whole string of factors that will determine the future of the Paris housing market.

Some of them suggest a weakening real estate market:

- During the 2nd quarter 1997, the average square meter price in Paris cost €2,268 (converted into €). Since then it has increased by a stunning 187% and it appears normal that the market slows down after such a long period of sustained growth.

- In the course of 2008 and during the first months of 2009 the number of transactions declined sharply and it seems coherent that this development now translates into falling prices.

- The current financial crisis leaves countless victims who lost large sums on the financial markets and who suffer from shrinking income.

Other factors will encourage investors:

- As a result of the high attractiveness of the City, there has always been very strong demand for real estate and a shortage of supply.

- There are tax incentives for investors who purchase newly built apartments and rent them out.

- The French real estate expert, Professor Michel Mouillart recently published a study which shows that French households’ financial situation is in general solid.

- Interest rates are low, they keep on falling and the banks’ ability to borrow money increases.

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Karl-Heinz Schabmuller
KHS, Paris http://www.khs.fr/

There is more information about the Paris property market here: http://www.khs.fr/index2.cfm?langue=EN