Archive for the ‘real estate’ Category

Latest Paris Real Estate Data – Feb thru May 2010

August 5, 2010

The Notaires of Paris have just released their latest figures on the real estate market throughout the Ile de France, including Paris.  The figures once again confirm the trend of increasing prices, both in Paris and the outlying suburbs.  Paris apartment prices are up 7.2% year over year (May 2010/May 2009), more than negating the drop in prices experienced for the year prior (May 2009/May 2008).  For the quarter ending in May, prices have once again increased 2.6%, adding to the string of quarterly increases of the prior to quarters.

Coupled with these solid numbers is a very healthy increase of 56% in the number of apartments sold in Paris over the last year, with 7900 apartments sold in the last quarter alone.

To view this report in its entirety, you can visit the website at http://www.paris.notaires.fr.

Update – Paris Real Estate Prices

June 23, 2010

One of the features that I post my readers on is the current state of Paris real estate prices.  Since my last update in Spring of 2009, a lot has obviously happened with the global economy, and I often get asked how the Paris real estate market has fared in comparison to the US market during these tough economic times.  The short answer is that Paris prices took a hit in the 1st quarter of 2009, accompanied by a dramatic reduction in sales volume.  However, since then, prices and volume have been steadily increasing, with prices per square meter now approaching once again the peak values found in the 2nd quarter of 2008.

The Paris notaires have just recently released their quarterly summary for the 1st Quarter, 2010, and with the exception of the most expensive neighborhoods (the 4th, 6th and 7th arrondissements), all areas within the metropolitan Paris region showed a continuing rise in values.  Take a look below.

Based on my experience so far this year researching and seeking out qualified properties for my next fractional project, I can tell you briefly that the inventory of good quality apartments still remains in very short supply, and that prices for such properties are averaging well above 10,000€ per square meter for even those properties with unremarkable locations or physical characteristics.  So it will be interesting to see what the next report will indicate when it comes out in late August, 2010.

Paris Prices Fall Slightly in 4th Qtr 2008

April 8, 2009

According to the quarterly report published by the Notaires of Paris, prices of apartments in Paris fell by 1.9% in the 4th quarter of 2008, compared to the same quarter in 2007.  For the year, real estate prices in Paris appreciated 2.5% over 2007.  Considering the global real estate crash, including other major cities like London and New York, it appears that prices in Paris continue to show relative strength, particularly considering that a fair portion of purchasers are foreign, and that market has vanished.

Here is the picture of 2008 price changes for each of the arrondissements.  As you will note, many of the neighborhoods actually showed price growth in 2008.

4th-quarter-2008-paris-prices1

I suspect that prices will continue to soften somewhat for the first 2 to 3 quarters of 2009, reflecting a continuing weak demand due to the global recession.  This reduction in prices is not due to a “bubble”, unlike the situation in London, but is suggesting that the current global reality affects everyone, including the French.

Property elsewhere in France did not fare so well, with prices falling an average of 1.5% for 2008, compared to 2007. Many of the popular Riviera departments suffered higher than average property value declines.

The 7 Questions You Need to Ask Before Buying a Fractional Ownership

January 5, 2009

DO YOUR DUE DILIGENCE

BEFORE YOU BUY

___________________________________________

1.  Who is the Developer?
Before you entrust your money to someone, check out their experience and track record.  It may sound like common sense, but many people are swayed by a slick website with fancy graphics and photos, without a clear understanding who they are dealing with.  Does the developer have the legal, technical and financial strength and experience to complete the project as presented?  What is their track history?  Do they provide the ability to speak with past clients?  These are important questions to ask.
2.  What are the annual costs of ownership?
As a part owner, one would reasonably expect that annual operating costs would bear a close relationship to the annual assessments. Of course, if concierge and hotel-like perks are part of the package, this can raise the annual costs dramatically.  Look at the true per diem cost of ownership (annual fee divided by number of days use) to determine if this is truly a good value. See if these costs are disclosed publicly on their website.  If they aren’t, there may be a reason.
3.  Who manages the property and at what cost to the owners?
Some developers encourage and train the owners on self-management; others have a management contract with sister companies.  This is profitable for the developer, but not always a good deal for the owner.  Find out ahead of time what the annual costs of management are, and whether the management contract is able to be canceled or renegotiated.
4.  How much markup does the Developer charge?
Most developers do not like to disclose their profit margins, sometimes for good reason.  It is not reasonable to expect a Developer to work for free, nor to expect that a fractional interest of a property that has been completely renovated and furnished, is somehow the same as the market value of the same apartment times that percentage.  It costs a lot of money to find, acquire, renovate, furnish, market and complete a fractional project.
Having said that, Paris property prices per m2 are published every quarter and are well known in the local industry, down to each neighborhood.  Anything over 140%  of current market value divided by the number of shares is, in my mind, excessive. Some developers have a markup in excess of 300%. (4 times market value). What can I say, except that, when it is time to sell, knowing this information before you buy can mean the difference between enjoying a profit and taking a major financial hit.  The real estate market is not kind to overpriced property.
5.  What is the legal structure of the Project?
Ask this question upfront if it is not disclosed.  Buying a property in a foreign country is fraught with risks and complexities. A simplistic legal structure may be easier to understand, and inexpensive to form, but could be extremely costly down the road.  Remember, France is not particularly friendly to foreign companies as a general rule, and foreign companies that do business in France without the annual filing of required disclosures and payment of any requisite taxes are dealt with particularly harshly.
6.  Does the Developer offer a rental program for unused time?
This is a harmless question if the property is located in the US, but a deadly one if the property is located in France.  All I can say is, if the Developer is not aware of, or ignores French law pertaining to rental of property, it is the Owners that will pay the consequences.  See my commentary in the FAQ section of this site.
7.  Can I reasonably expect to use the time that I have purchased?
The whole reason behind fractional ownership is that you can purchase just the amount of time that you would reasonably expect to use.  Don’t buy more time than you need, and never buy excess time for the possibility of rental income.
Some developers require that you take your time in 2 different time periods each year (usually high season and low season).  This is fine if you expect to travel to Paris twice each year.  Otherwise, factor in the additional cost to travel to Paris just to be able to use that extra time.
Summary
If you get the answers to these questions and feel comfortable with the answers, then you have done your homework.
Reprinted from the Paris Home Shares website at http://www.parishomeshares.net/7 Questions.html

How to Survive and Thrive in a Recessionary Economy

December 3, 2008
Courtesy Paul Lachine /Newsart.com

Courtesy Paul Lachine /Newsart.com

10 Common Sense Tips That I Learned

I am no rocket scientist, but I have been through at least 2 recessions, and actually did quite well during those periods.  Here are some common sense tips to get you through these trying times. First, the Don’ts.

1.  Do not believe what you read. Fear and panic sell far better than common sense and good news.  Take all facts reported with a grain of salt, and discard all opinions.  Television, newspapers, magazines and even e-news sites are in business to sell you something (advertising); not necessarily to make you better informed. They may even have their own agenda.

2.  Do not believe anything a politician or government expert says. If they really knew more than us, they would have seen this debacle coming a long time ago.  For example, even I wrote early in 2008 that the recession started in late 2007.  No politician dared utter the “R”word until late October 2008. I (and many others) saw the real estate collapse coming in 2005.  But the politicians liked how the free-wheeling market kept the economy chugging along.  It is intuitive that these folks tell us what they think we want to hear, not what we need to hear. Or maybe they never had a clue. It really is time for us to start thinking for ourselves.

3.  Do not heed advice from any Wall Street “expert” or analyst. These folks really do not have any better idea what is happening than you or I. If they did, they would all be wealthy and not need to peddle advice for a living. If they tell you to sit on the sidelines for 6 more months, that is because they will be back in the market in 3 months so that they can sell to you in 6 months.  If they tell you to buy now because stocks are cheap, it is because they are trying to unload their losers.  Really, if you flipped a coin for every stock market decision, you would consistently outperform 85% of the pundits out there. If you must be in the market, here are some common sense approaches.

a) Dump your losers and marginal performers now and take the tax writeoff. At least you will see some immediate tax savings, before the tax rates get hiked up to pay for the bailout.

b) If you must buy, buy solid companies with a good track record and plenty of available cash on hand.  Do not try to time the bottom of the market, as no one knows where it is.  Use dollar cost averaging to buy.  Ride the cycle through the bottom and when it starts coming back up, stop buying when the price matches what your first purchase was.  Companies paying dividends are especially nice at these prices.

c)  Consider that we are in a bear market for the near term, and that the stock market will most likely underperform other investments for the next year (or two or three).  Consider other investment vehicles.

d)  Market volatility may tempt you to speculate on a quick killing.  Don’t! Go to Las Vegas instead.  At least you will get a free drink while you lose your money.

This market collapse cannot be compared to any other.  The laissez-faire free market capitalist economic model is in danger of total collapse. Think of what that means.  Also, we cannot compare recovery periods by looking back in time.  The world’s economies are now inextricably linked in a way unlike any other time period.  Our recovery depends on the recovery of so many other nations, many of whom do not have a mature economic infrastructure to help them back onto their feet.  These countries could act as lead weights to our recovery, despite all of the infusion of capital by the Feds.  Do not be naive about how long this economic downturn could last.

Now here are some common sense things to do.

4.  Strengthen Your Position. If you are a business owner, now is an excellent time to visit your clients and reassure them that you will be around for the long haul to meet their needs.  It is also an excellent time to increase your market share by acquiring weaker competitors and to lure top talent away from them.  Just be sure to pay what they are worth, or they will be gone the minute the economy recovers.

5.  Cash is king.  Debt is death. If you were foolish enough to accumulate a pile of credit card debt, start by paying that debt off.  The interest you save is most likely the best return you will ever see on your money.  If you are debt free, then start an aggressive savings program by paying yourself first.  Search for the best interest rates on the Web.  There are many online banks, FDIC insured, that pay far more than your local bank.  Also check out credit unions.

6.  Consider alternative investments. Fill a need.  Right now, banks aren’t lending.  Maybe you can be “the bank”, provide capital to a worthy business, or be a lender on real estate.  Your returns would be far better than a money market account, and you would be alleviating the credit crunch for someone.  Just do your homework beforehand.  Check out Virgin Money as an intermediary.  Richard Branson is already ahead of the curve, as usual.  Or maybe invest directly in real estate.  The nice thing is that real estate values rarely drop to zero (unlike stocks).  Just don’t leverage, and always remember that a prime location at an expensive price is always better in the long run than a lousy location at a cheap price. Plan on a long term holding period.

7.  Chart Your course. Develop a 3 month, 6 month, 1 year and 2 year plan of action. Set your goals, then your benchmarks to reach those goals, and follow them religiously.  Review the plan every 3 months and revise as needed.  Without goals and a clear plan of action, you are doomed.

8.  Look for opportunities. They are absolutely everywhere, in every field.  This time period is a bargain hunter’s treasure trove; literally the best I have ever seen in virtually every area.

9.  Think positive. No recession lasts forever. You will survive, and maybe even learn a thing or two about economic cycles.  Take time to laugh and whatever you do, keep your sense of humor.  If you don’t have a sense of humor, make friends with someone who does.

10.  Strengthen Your Relationships. Spend more time with your family and friends.  Offer to help those less fortunate than yourself. Take the time to make yourself a better person.  Know that, when all is said and done, it is not what we have in our account, but who we have in our hearts, that truly makes us wealthy.

Paris – Safe Haven in a Troubled Real Estate Climate?

September 27, 2008
Autumn in Colorado

Autumn in Colorado

Yesterday, I came across two interesting articles, both British based, about real estate prospects in France, and Paris in particular.  One was a commentary in the Financial Times, which you can read here.  The other was on BBC – America television. Both highlighted the differences between the French real estate market and that in America and the UK.

As is well known, the American housing market is in a severe downturn, resulting from overbuilding, rampant price speculation and lenders feeding the process with poorly underwritten loans to unqualified borrowers.  All of this started to unwind in 2006 and the process could take another year or two to resolve itself – if credit is available to purchasers.  Right now, the credit markets are all but dried up, and if that continues, there will be no loans available under any terms to allow the free market to resolve the situation. Simply put, banks have no money to lend, because all of their reserves have been set aside for the bad loans they currently own. Many are on the brink of failure.

The situation is not much different in the UK, albeit on a lesser scale.  The UK and Ireland experienced their own version of the housing bubble. They are going through the same process of rapidly falling house prices and lack of available credit.  Their banks are looking for government bailouts.  Banks are merging in a last ditch effort to survive. Barclay’s is no more, Bank of Scotland is gone, and the taint of the poisoned US subprime market permeates the portfolios of all of the remaining UK banking institutions as well.

So why has Paris, and the rest of France to a lesser degree, survived this housing meltdown relatively unscathed? There are several underlying reasons, as pointed out by the BBC.  First, there is not the fever in France to get into the “home ownership” game.  France traditionally has been a country of renters, and much of the property that is owned has been in the same family for generations.  Speculative “flipping” is simply unheard of.  Second, the French people have no credit card debt.  They are a country operating under the philosophy that you do not buy something if you do not have the money to pay for it.  Of course, that financial philosophy went out the window long ago in the US.  Most French credit cards are actually debit cards.  If the funds are not in the account to pay for the transaction, it simply does not happen.  Third, French banks are and have traditionally been far more conservative than their American and British counterparts.  Home loans are amortized for 15-20 years and usually require a minimum 20% down payment.  No 125% financing here.  Loan qualification is a rigorous process.

As a result, the financial underpinnings of the French banks and the French real estate market are more along the lines of what we in the US knew in the 1970’s and 1980’s.  This is also why, to a large degree, French real estate has appreciated much more slowly in the last 10 years than, for example, the US or UK housing markets.  The Spanish housing market is a totally different creature, having been overbuilt, rife with corruption and now crumbling.  That reality adds a double whammy to the many Brits who bought a 2nd home in the sun there with the suddenly realized home equity in their homes in Great Britian. Now, they are upside down in both Spain and at home, and for many this represents the loss of their entire pension savings.

The French real estate market is not immune to what is happening in the rest of the world, of course.  Unemployment is increasing, their trade exports are dropping due to the recent strength in the dollar, oil and food price rises are impacting the everyday Frenchman, and tourism is way down.  Home prices in many parts of France have seen a downturn, particularly in the southwest regions like the Languedoc.

In Paris, buyer demand for properties has tapered off dramatically.  Most Parisians cannot afford to live in their own city.  Foreign demand is also down.  However, like London and New York, demand for premium properties continues to remain strong.  Notwithstanding the volume slowdown, the prices in Paris continue upward, to the astonishment of most of the rest of the world. The most recent study shows Paris prices appreciating 9% in the last year.  I do not think this will continue indefinitely.  I would suspect Paris prices to flatten out or even drop slightly in the short term, until the global economy gets back on its feet. After all, Paris is an international city, and international money, particularly oil money at the moment, continues to play a key role in sustaining this market. Paris too is not totally immune to what is happening with the rest of the global markets. However, with beautiful architecture, a rich and colorful history and a fixed supply of real estate, Paris will continue to be in high demand, so long as it does not follow down the road of mistakes made by other real estate markets.

Perhaps, for those of us who feel more comfortable with our investments in real estate instead of the stock market, Paris may be the last truly safe haven for rational long term real estate investment, at least until there is some stabilization in the markets we have been more familiar with in the past, whether they be in the US or elsewhere.  Whether we like it or not, the French got it right, and we didn’t.