NEWS ARTICLE: Channelling Paris
(Lisa Freedman, Financial Times / How to spend it, 06 October 2007)
Paris has always had perfectly proportioned property but, when it came to luxury finishes and services, lagged behind London and New York. Not any more, reports Lisa Freedman.
Those with a passion for Paris are counting the days till Eurostar sets off from St Pancras International. On November 14 another 20 minutes will be lopped off the London-to-Paris route, cutting the journey time to just two hours and 15 minutes. Wealthy tourists have always flocked to the French capital but, until recently, they have preferred to rest their shopping-weary feet in discreetly splendid hotels such as the George V and The Ritz. Now, Paris finally looks likely to secure its rightful place in a five-star property portfolio.
"The world's new multimillionaires want to invest in countries with secure institutions and a stable currency and Paris offers the social status they're looking for," says Marie-Hélène Lundgreen, director of Belles Demeures de France Fine Residences. "In the past five years we've seen the emergence of buyers from Russia, Pakistan, the Gulf, China, India and Hong Kong, who have joined the Irish, Americans and English. They're now here in significant numbers and have a significant amount to spend."
Paris, with its noble hotels particuliers and luminous, parquet-floored apartments, has always offered some of the most perfectly proportioned domestic space anywhere, but in recent years the quality of finish and calibre of services has lagged well behind what's on offer in New York, Los Angeles, London and even Moscow. Those who have a clutch of homes around the world expect their inner-city square footage to come equipped with lifts and parking, security and air conditioning, high technology and turn-key interiors. These are all in short supply in a city that hasn't built a new luxury apartment block since the 1930s. "The international demand is there, but our buyers want perfection," says Lundgreen. "They want the location, but they also want the services and there's tremendous scarcity."
The UK developer City Lofts has seen the gap in the Paris market and this May launched its first project in the prestigious 16th arrondissement, the stately quartier wedged between the Eiffel Tower and the Arc de Triomphe. "We're offering valet parking, 24-hour security, air conditioning and interior design by Conran & Partners," says Ross Mansoori-Dara, cofounder. "We felt there was a type of buyer you would find in London or New York looking for a certain standard of specification and services. We had interest in all 40 units before the launch." First the traditional Parisian approach to interior design needed to be addressed. "Usually in Paris, you don't get the kitchen, just wires hanging from the wall, and if the bathrooms are finished, you count yourself lucky," says Isabelle Chatel de Brancion, project architect for the City Lofts development. "But buyers nowadays don't want to come in and make it up. Here everything will be done for them to the highest standards - we'll have integrated TVs in the bathroom and fully fitted sound systems."
City Lofts has chosen its location with care; international buyers - who make up eight per cent of the Paris market - are picky when it comes to postcode. Many top-end native buyers - including Nicolas Sarkozy - tend to move their families out to smart commuter suburbs like Neuilly, but overseas visitors insist on being central. They have long favoured le triangle d'or, enclosed by the Champs Elysées, Avenue Montaigne and Avenue George V, and St Germain on the Left Bank, with its designer boutiques and chic restaurants and, that pinnacle of Parisian romance, the Ile St-Louis, enthroned in mists in the middle of the Seine.
But the buying map has expanded over the past few years. "The Rue Royal and the area next to the Louvre - near hotels Meurice and Costes - is becoming a new golden triangle," says Jean-Philippe Roux, Paris director of Knight Frank estate agents. "It's still historic, and you can walk to all the museums." Younger buyers, in their 30s and 40s, have become even more intrepid. The Marais in the 4th, once a snarl of medieval streets inhabited by rich viscounts and poor Jews, has been a fashionable Right Bank quarter for several decades, but young Parisian "bobos" (bourgeois-bohèmes), the new enlightened elite, have made inroads into Bastille in the 12th, the super-cool Canal St Martin in the 10th, République and parts of Montmartre - all conveniently located for those hopping on the train back to London on a Sunday night.
The English novelist Lucy Wadham owns a flat in Abesse, in the shadow of Sacré-Coeur. "When we bought it four years ago, this area wasn't too expensive, but it's become more so, with English and American buyers pushing up prices. It's still very charming and authentic, with cobbled streets and windy roads. It still has original street markets and famous drag queens."
Whether you're looking for atmospheric "vieux Paris" or international luxe, Paris can be a particularly difficult city to find it in and, as in London, foreign buyers are increasingly turning to search agents to do their purchasing leg-work for them. "It's a very different buying culture," says Gilles Martinetti, who set up the London office of Paris Passion Property last year after seven years as a negotiator in Paris. "A lot of vendors advertise without using an agent - and there are no central listings. A property can be on the market with several different agents at different prices, so it can be problematic to secure a property and equally hard to negotiate the price." After a long static period in the 1990s, Parisian prices have risen rapidly. Entry level for a two-bedroom flat in a prime location is now about €450,000 (£306,000), with price per square metre recorded as high as €27,000 (£18,400). And the trend is emphatically upwards. According to Knight Frank, prices rose by 15 per cent in 2005, 10 per cent in 2006 and, although growth has slowed somewhat this year, the forecast continues fair. "We were predicting a rise of between three and five per cent," says Roux, "but now we think it's going to be more - we felt the Sarkozy effect immediately."
Investors are keeping a close and enthusiastic eye on the new president's desire to bring about a Thatcher-like revolution in the French approach to property ownership. "Sarkozy has plans to introduce tax breaks to allow buyers to offset mortgage interest against income and to sell off thousands of council homes," says Nick Leach, head of UK and Ireland business development for long-established French property and tourism company Pierre & Vacances. "He may change inheritance tax rules and raise the threshold for wealth tax - all of which would stimulate the French property market from within."
Many investors in Paris hope to combine holiday accommodation with steady capital growth. In the 1960s, the French government introduced a VAT rebate for property bought and managed in France. Pierre & Vacances, which specialises in this type of "leaseback" accommodation, has now gone into the city-break market and its two recent projects in the centre of Paris - the 370-apartment Paris Tour Eiffel and high-end 50-apartment Boulevard Haussmann - were both speedy sellouts. "It's a fire-and-forget investment," says pilot Andrew Potts, a recent purchaser. "They do everything: the refurbishment, the letting and sorting out the mortgage. Returns are guaranteed. All you have to do is pay the deposit."
Though it's harder work and greater risk, if you take responsibility for your own sub-letting, the benefits can be even greater. "A one-bedroom flat on the Ile St Louis can bring in €1,200 a week," says Jean-Philippe Roux. "And it's not a seasonable market - there's a 70 to 80 per cent occupancy rate. A flat that cost €500,000 can provide a yield of about seven per cent and you can still use it when it's not let out." But even those not looking for a mini-break now see Paris as an attractive investment opportunity, particularly as rental returns diminish in the UK. London-based Richard Dixon, who works in the financial market, was one of the first to view the City Lofts project and liked the look of what he saw. "I have eight buy-to-let properties in the UK but property here has become too expensive. The Americans love Paris, the Brits love Paris and, under the new presidency, I think it has great potential." The other plus, of course, is that if he decides to go ahead, he'll have no problems nipping over on Eurostar to complete the deal.
For more information please contact: Emilie Lemons, Conran & Partners: cp@conranandpartners.com
October 2007
