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After a period of uncertainty, in part due to squeezed margins and higher mortgage rates, more French banks are now willing to lend to non-EU residents than 12 months ago. According to the Douglas Elliman|Knight Frank Prime France Report, UK and US buyers were notably more focused and engaged in their searches between April and June 2023 as a result. In addition, the continued high demand spurred on by the pandemic has led to many French prime property markets recording double-digit property price growth in the 10 years to 2022.
“The resilient appetite for French homes from overseas buyers, despite the economic headwinds, has seen new high street banks enter the market, offering 85% loan-to-value mortgages without the need for additional assets to be secured against the loan, as was previously the case,” said Kate Everett-Allen, head of international residential research at Knight Frank. “Nonetheless, inflationary pressures, higher mortgage costs and recessionary risks are weighing on sentiment. New buyer enquiries are lower than in 2022, but existing buyers remain motivated, with robust viewing numbers over the summer months.”
“Despite recent economic headwinds,” added Mark Harvey, head of the international residential department at Knight Frank, “France is proving to be a resilient market, still registering strong demand from overseas buyers. Unlike other advanced economies, the interest rate is often fixed for the life of the loan in France and household debt is relatively low. Given these factors, France is likely to be less impacted by future interest rate changes, compared to some of its neighbors.”
PARIS
Set against a backdrop of limited stock, overseas buyers have been returning to Paris, with US, Middle Eastern, Italian and some Asian buyers active in 2023. According to the Paris Chamber of Notaires, sales in the city reached a seven-year high in Q3 2022. The demand/supply imbalance is supporting prices. The city registered 4.3% price growth in the year to Q1 2023. Over the decade, prime prices in Paris have seen an uplift of 24.6%, performing better than London (-5.9%) and New York (11.8%).
Paris has also experienced an influx of bankers and finance professionals post-Brexit. Data from the European Banking Authority confirms a 71% increase in investment bankers in the year after the UK left the EU, a trend set to continue. Public investment is also pouring into the city. The 2023 Rugby World Cup, the 2024 Olympic Games and the extensive Grand Paris Project, which will see the delivery of 68 new stations and four new rail lines, will encourage further private investment.
FRENCH RIVIERA
Prime prices increased by 14.8% on average across the French Riviera during the pandemic, with St. Tropez the top performing market, up 17.1% between 2019 and 2022. Stock levels are slowly recovering from their pandemic lows. Despite high build costs the French Riviera is seeing a high level of construction with new developments, including bespoke design-and-build projects springing up, signaling a confident outlook for the market.
British, Swiss and Nordic purchasers led the charge the first half of 2023, but the region has one of the most diverse mix of buyers globally. US buyers are continuing to take advantage of the exchange rate across the region, with St Tropez a key focal point. Knight Frank expects prime prices to rise on an annual basis in 2023, but the rate of growth will be below that witnessed during the pandemic. As listings slowly rise, prime price growth, which sat at 8.7% in the 10 years to 2022, will moderate further in 2024.
FRENCH ALPS
With the pandemic kickstarting the race for space, demand outweighed supply between 2020 and 2022 as mountain living was in the spotlight, resulting in strong price growth. Prime prices across the 11 French ski resorts Knight Frank operates in increased 20.2% on average in the decade to 2023, but over half of this rise (10.9%) took place during the pandemic years. The market is now entering a period of normalization, although inventory levels remain at pre-pandemic levels.
After limited snowfall and difficult conditions at the start of the 2022-23 ski season, super-prime buyers are willing to sacrifice accessibility for better skiing conditions in the high snow-sure resorts such as Courchevel 1850 and Val d’Isere. French purchasers are notably active in the market too, snapping up smaller chalets below €1.5 million. Prime prices are expected to continue rising on an annual basis in 2023 and 2024, but the rate of growth will be notably more muted.
PROVENCE
The average price of a luxury property in Provence has increased 22.5% since the start of the pandemic, with 2022 seeing a 12% uplift alone. However, Knight Frank expects the rate of price growth to moderate in 2023. Although stock levels have improved since the pandemic low, they remain tight by historic standards, and this will protect the market from significant price falls.
Overseas buyers now account for around 55% of luxury purchasers in the region, up from 40% immediately after the lockdowns, when European buyers from Belgium, Switzerland and the Netherlands dominated the market. In 2023, the same buyer nationalities persist but have been joined by a larger number of US and UK purchasers. In addition, investment in region’s fibre broadband has heightened Provence’s appeal to freelancers and remote workers looking for a better work/life balance.
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