Prices for Prestige Properties Have Risen More in Paris Than Anywhere Else

Sixty eight million euros. This is the price for which the Bourbon-Conde hotel located in the 7th district of Paris sold 2 years ago. Today, it still holds the world record for the highest transaction. And since then the ratings for Paris in the luxury real estate market has grown and grown. According to a network of agencies in the premium housing market, it's in Paris that the prices of this section grew the most (+21%) in 2010.

The other "world-towns" which attract the wealthier people coming from the four corners of the globe have seen less spectacular progress: an almost stability in New York (+1%) and Geneva (+1.5%), and a reasonable rise in London (+8.5%).

Thus, in New York, the high standard houses cost approximately 10.1 million USD in 2010 whereas in 2009 they cost 9.7 million USD yet 11.6 million USD three years ago.

The gap gets wider again if we compare the evolution during the last 5 years: in Paris, the prices grew by about 44%, compared with only 25% in London while they remained steady in New York.

But the prices have stopped rising, the result is now here: considered for a longtime as cheaper than New York and London, Paris has pretty much managed to catch up with the other two, which is especially due to the fluctuations of the exchange rates. According to Barnes, another real estate network agency specialized in premium property, the most beautiful apartments situated on the left side of the Seine in the VI and VII district are currently worth between 14000 and 18000 euro per square meter whereas on the right side of the Seine, in the XVI and XVII districts, these properties can be negotiated between 9500 and 11500 euro per square meter.

No New-Build in Paris

Direct consequence: transactions for prestige properties have reached a new level. Therefore, a 250sqm flat with view over the Champ-de-Mars was sold a few weeks ago for 5.8 million euros, 23000 euros per square meter. "Today, the prices are 10% higher in Paris than New York for equally valued properties", estimates a local estate agent.

The experts have various explanations for the French capital's catching up. In Paris, there's fewer products because they haven't build prestige dwellings since the SRU law of 2000 which means a 20% of buildings must be kept for social housing in new developments. Although New York is a case apart in the United States (of America), the town has suffered from the subprime crisis which affected real estate. Moreover, Paris has a trick: it is more of an international city than New York. In the last 12 months, 40% of new owners of properties valued between 4 and 10 million euros were foreigners in the French capital. With a diversity of nationalities (Russian, Middle-Eastern, Chinese, American...) which protects from regional economic crisis.

You can view some of our properties for sale in Paris or view the map of Paris with the different arrondissements.

Sextant French property is a network of more than 160 estate agents and 50 developers in France offering a selection of 12,000 French property for sale.

They also offer French property investment such as French Leaseback properties

In order to improve their service to their customers they set up a French mortgages division who can also help customers who bought through a different French estate agent.

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How To Spot The "Turn" In Real Estate Prices

Housing contributes to economic activity in two ways. First, when folks invest money to build or buy homes. Second, when they spend money on utilities, rent, appliances, landscaping, and other housing services. The first contributes about 5% to GDP and the second about 12%, for a total of approximately 17% - which is quite a bit. So housing is a really important driver for the American economy.

In fact, many analysts look at housing data to gauge the health of our economy. Very simplistically, if folks are above-water on their homes, they feel confident and spend on all manner of things - new clothes, cars, home improvements, new businesses and so on. When their homes are worth less than what they bought them for, they feel less inclined to go out and spend or start new businesses.

The state of housing, in turn, depends on the following factors:

Employment. Sort of obvious, isn't it? Without jobs, people cannot take out loans to buy homes so housing demand drops, and home prices either stagnate or dip (as they have done since June 2006). So we must see meaningful job creation before a recovery in housing.

New Housing Loans: Take data on new mortgage loans, and then strip out refinancings (because they do not indicate new home purchases). What we're left with are mortgages for home purchases - compare this to historical numbers to see if loans are rising or falling, and at what rate. This is a two-way indicator. It tells us if Americans are taking out loans to buy homes and if banks are upbeat enough about the economic future to make loans to creditworthy buyers.

Housing Inventory: Basic supply and demand between homes available for sale versus home buyers. As a rule of thumb, if there are more homes for sale than buyers plan to purchase in 6 months, prices fall. When housing inventory is less than 6 months, prices typically rise. For example, during the housing bubble, inventory was often less than 4 months. When the housing market crashed, inventory exceeded 12 months.

If we factor in shadow inventory - properties which could come up for sale because borrowers are more than 90 days delinquent on their mortgages - housing may take slightly longer to recover.

Price Trends: Watch housing prices for signs of strength of weakness. Rising prices bode well. Falling prices typically suggest economic weakness.

Construction Activity: When there is a lot of existing inventory of homes for sale, builders hold back on new home constructions. Builders may also hold back if they expect economic weakness because they wouldn't want to build homes with few takers down the road.

Lumber: 88% of all U.S. lumber goes into housing construction. Thankfully, the lumber market attracts few speculators, so lumber prices pretty accurately reflect real supply and demand. If prices start to go up, we can be pretty sure that construction activity is on the rise - a good early sign of a recovery in housing.

Knowledge is power! So... now that you're considerably wiser on the factors that impact housing, you will find yourself perking up every time you see them on paper or hear some talking-head spout these numbers. Almost subliminally, you will pick up information that earlier just went over your head. My hope is that, armed with this information, you will develop a keener sense on housing related signals, their implications for the economy, and more specifically, for your portfolio, and make better investing decisions.

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Steven L. Pomeranz, CFP is a 29 year investment management veteran and host of "On The Money!" which airs on NPR station, WXEL in South Florida. He concentrates on serving high net-worth individuals and has been named one of the Top 100 Wealth Advisors 2007, by Worth magazine (October 2007 Issue), honoring America's premier financial and wealth strategists.

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