Since the lockdown of our city, we are quickly adapting to the Coronavirus impact on Paris real estate.
Along with the capital’s other service-based businesses, we are facing challenges during this exceptional time. This includes attempts to work while respecting the strict lockdown regulations in France. This is difficult, if not impossible, be it virtually or in person.
Aside from the impossibility of organizing visits, we are also facing a stage of hesitation. For buyers, this may be speculation that prices could go down during the COVID-19 pandemic.
Sellers, however, may be holding back their properties in hope of a financial crisis actually driving real estate prices further up.
While we pause our activities along with the rest of the world, we examine how our city fared during past events. It is a look to the future for property buyers and sellers here in Paris.
A look back to the 2008 financial crisis
12 years ago, a global financial crisis gripped the world. While many markets suffered enormous losses, real estate in Paris remained stable in comparison.
This may be a surprise to those affected by the subprime mortgage crisis and the collapse of the housing bubble in the United States during this time.
Of course, no one knows what the post-Coronavirus market will look like. But it is interesting to put the current situation into perspective.
How did Paris cope last time?
Unlike the US, there was no major real estate crash in 2008/09.
2009 saw a brief decline of -4% in property prices. However, a sharp increase followed in 2010. The following two years saw an increased rebound with growth of 35%. Afterward, a gradual -10% correction was evident over the following three years.
To compare, by mid-2009 the average price for property in Paris sat around the 6,000€/m² mark. By 2012, it averaged 8,450€/m², continuing the upward trend.
This leads to the current averages. As 2019 closed, the average price in Paris exceeded 10,210€/m². That’s an increase of 28.3% in 5 years, something we previously reported in this blog.
However, it is important to note the gap between property prices in Paris compared to London and New York is not as large as it was 12 years ago.
We suggest this means that if expected growth does continue in 2020, it may not follow the same increases as it did a decade ago.
Why Coronavirus is different
The Coronavirus situation, while unsettling, has one major difference from the previous crisis in 2008/09.
This time, the issues have not originated from the banks themselves, but rather, an uncontrolled external source. This means it does not endanger the ‘nerve center’ of the economy, namely the banks’ payments and settlements systems.
Financial experts have also suggested the market’s eventual recovery will receive a boost from low mortgage rates. This is set to boost consumer purchasing power when the Coronavirus situation is behind us.
The markets losing value may also strengthen real estate as a solid investment safe haven.
But Paris is unique in more ways than one
It is also important to understand the unique context of Paris in other ways.
The French capital does not behave or develop like other cities. This is due to a few special characteristics.
Firstly, is the size of Paris. Covering 41 square miles, it has a small population of 2.1 million. That is modest for one of the great cities of the world. Compare this to London and New York, both with some 8 million people.
Paris stands apart in other ways too, with its combination of architectural beauty and period properties, and a unique culture, history, and European lifestyle.
Real estate prices are significantly lower than other cities such as London and New York too.
All these factors ensure the Paris property market is a one-off, and difficult to compare to other world cities.
So it is true that no one truly knows the Coronavirus impact on Paris real estate at this stage. However, the specifics of the French capital do make it unique and give hope that the city can weather this storm, just as it has done in previous years.
Latest reports of the Coronavirus impact on Paris real estate
Several financial and investment experts have shared their views concerning the Coronavirus impact in Le Figaro, the oldest daily newspaper in France.
One expert urges for calm, saying “Fewer people are keeping a cool head, maintaining their savings discipline, and then rejoicing when the markets go up, as they always do.”
Another expert suggests, “In a situation of this nature, haste is bad advice. For buyers, it is possible that bargains may appear in the coming weeks, some people may need cash. But it is wiser to wait for the situation to stabilize.”
The report also states, “It is hard to imagine a price collapse but rather a market that would idle, sellers and buyers waiting for a return to normal to put their properties up for sale or to resume their research.”
Support from the 56Paris team
Taking everything into account, we are expecting property prices to remain relatively stable in Paris. Based on previous trends, they may even see some growth in the post-Coronavirus market.
If you are thinking about your own real estate investment in the near future, we are here to offer free, no-obligation advice. Get in touch with the team at 56Paris and we will be happy to share our expertise and assist with your plans.
All information given in this blog is current at the time of writing and is a guide only. Past performance is not a guarantee of future return. All investments involve risk and the value may fluctuate over time, including going up or down.