Demand strong for France’s prime residential: Knight Frank

France’s prime residential property markets have seen strong demand between April and June this year, especially from UK and US buyers, according to new research by Knight Frank.

“Despite recent economic headwinds, France is proving to be a resilient market, still registering strong demand from overseas buyers,” said Mark Harvey, head of the international residential department, Knight Frank. “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 neighbours.”

Paris recorded 4.3% price growth in the year to Q1 2023, against a backdrop of limited stock. Overseas buyers have been returning to the French capital, with US, Middle Eastern, Italian and some Asian buyers being particularly active. Sales in the city reached a seven-year high in Q3 2023.

The Brexit effect played a part, as there has been a 71% increase in investment bankers in Paris after the UK left the European Union. Over the last decade, prime prices in Paris have seen an uplift of 24.6%, performing better than London (-5.9%) and New York (11.8%).

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.

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 and there is a strong pipeline of developments, a sign of a confident outlook for the market.

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. However, Knight Frank expects the rate of price growth to moderate in 2023. Overseas buyers account for 55% of luxury buyers in the region, up from 40% before the pandemic.

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.

“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, Knight Frank.

But inflationary pressures, higher mortgage costs and recessionary risks are weighing on sentiment. “New buyer enquiries are lower than in 2022,” she said, “but existing buyers remain motivated, with robust viewing numbers over the summer months.”