Foreign investors return to france in force
Photo: Moyan_Brenn
Foreign buyers made up 51 per cent of the French investment market between January and June 2014, according to a new report by Savills. Investment volume climbed 35 per cent compared to the same six months in 2013, driven by increasingly large deals: transactions worth more than €100 million made up almost three quarters of investments.
The demand was driven by the amount of capital already earmarked for real estate, with mega deals returning despite relatively weak growth in the French economy. Indeed, GDP grew just 0.3 per cent in 2013, while growth of 0.8 per cent is forecast for 2014. Nonetheless, the increase in investment boosted transactions to €6.1 billion, with retail property activity more than doubling to make up 28 per cent of investment.
"One of the features of the market in 2014 was the resumption of transactions above €500million including three exceeding a billion euros," explains Marie-Josée Lopes, Head of Research Savills.
Americans fuelled the surge with the year's biggest sale - Cœur Defense - which took their share of the market to 22 per cent. Indeed, US investors now lead foreign investment, which Lopes attributes to their willingness to "[follow] more opportunist strategies than other players in the current market".
International investors made up 60 per cent (in volume) of sales worth over €100 million and 44 per cent for those between €20 million and €100 million. Domestic investors, on the other hand, have seen their share of activity plunge from 65 per cent last year to 49 per cent.
The trend has been matched in Paris' apartment sector, according to new figures from notaires. The data released this week shows that foreign purchasers of apartments in the French capital now account for the highest proportion of activity in 15 years, thanks to the attraction of low prices.
Indeed, prices in Paris have fallen by 3.7 per cent since peaking in the third quarter of 2012, according to notaries and national statistics office Insee. Foreign buyers made up 8.3 per cent of total sales in the second quarter of 2014, up from 7.8 per cent a year earlier.
While Americans dominate investment overall, Italians are the strongest force among Parisian apartments, making up 17 per cent of foreign buyers, ahead of the Chinese (6.5 per cent).
"[Foreign investors] are confident in French property," Thierry Delesalle, a Paris-based notary, told the South China Morning Post. "They haven't been so prevalent in 15 years."
Prices in Paris may continue to fall, if the government caps rents, which would impact property's appeal to investors. Nonetheless, if the French economy improves, foreign investors are expected to continue stepping up activity overall, says Savills.
Asian investors, who were "largely absent in the first quarter", made a "remarkable entrance" in the first half of 2014 to account for 5 per cent of transactions.
"Other Asian funds, especially Chinese ones, will probably start becoming active in France alongside existing market players. There will continue to be a shortage of new supply in 2015 as the number of planning permissions and off-plan sales remain low," says Marie-Josée Lopes.
"Foreign investors have returned to France in force."