With Britain leaving the EU, Paris real estate’s appeal soars
British voters have cast their ballots and the campaign for Britain to leave the European Union has won by a small margin. While Brexit has caused the pound to crash and British Prime Minister David Cameron to resign, it is expected to benefit the Parisian economy, particularly the luxury real estate sector, set to be boosted by an influx of foreign buyers.
Europhiles going to bed confident in Britain’s Remain campaign on Thursday night woke up to a very different economic reality the next morning. The Brexit vote, which won by 51.9%, caused the pound to crash and heads to roll. Indeed, Prime Minister David Cameron, who vehemently led the Remain campaign these past months, has announced his resignation.
Brexit’s impact on the pound and the British economy:
The financial markets have suffered a blow from British voters’ decision and the pound sterling has experienced its steepest drop in over 30 years. Following the announcement of the Leave camp’s victory, the pound fell by over 10% against the dollar, reaching its lowest level since 1985. It fell to GBP/USD 1.32 at its lowest point and currently stands at 1.37.
The sharp devaluation of the pound has shaken the British economy, forfeiting the stability craved by investors, and may well see wealthy investors placing their capital elsewhere.
While this morning’s verdict spells difficult times ahead for Britain, it may benefit France and other EU countries, according to financial and real estate experts. Brexit has the potential to push companies and investors out of the UK and into France, as real estate company Coldwell Banker France & Monaco, predicted back in March. London currently houses 40% of the European headquarters of the world’s 250 largest multinationals. In February, HSBC warned that it would transfer 20% of its workforce (equivalent to 1,000 employees) to Paris if the UK left the EU.
As Tony Burke, from Unite the Union, puts it “thousands of jobs will be transferred to the other side of the Channel.” According to Standard and Poor’s, the French capital is very well positioned to become the European Union’s next leading financial center — even though Frankfurt may also be a contender, by virtue of the German city being home to the European Central Bank.
Paris’ luxury real estate set to benefit:
Investors in Parisian luxury property have been pouring in steadily over the past two years, leading the sector to record a particularly successful year 2015. Charles-Marie Jottras, CEO of Daniel Féau Immobilier, announced on Wednesday 22 June — just a day before the British referendum — that the luxury property sector’s activity had grown by 23% in 2015, totaling 3.8 billion euros, and that this positive trend had carried into 2016, with an 18% growth recorded since January.
The threat of Brexit — which started to weigh on investors’ minds since the referendum was announced in February — has added to Paris’ existing appeal. Indeed, Coldwell Banker noted a rise in enquiries into buying property in the city since February, with CEO Laurent Demeure remarking that “more and more bankers, lawyers and high-end company executives have contacted us about buying in Paris.”
In an interview with BFM Business, Demeure called Brexit an “opportunity for Paris,” because of the need for multinationals to be implanted in the heart of the European economic union. With Paris and London having gone head to head over the past fifteen years in their bid to attract the most corporate headquarters, investment funds and financial and tech companies, Paris is “the only alternative.” Indeed, most large companies cannot afford to stay out of the EU, and will thus be forced to transfer their activity from London to the French capital. These leaders, managers and executives will all require high-end homes, giving the Parisian luxury sector an added boost.
Interestingly, Demeure mentions several clients who have made initial plans to buy property in Paris but reserved their final decision for after the referendum result, awaiting the confirmation of a Brexit to finalize their purchase. These clients reportedly include employees of large financial companies. He believes that many of these people will also be buying second homes for their holidays, in places such as St Tropez, the Basque Coast and the Bassin d’Arcachon, resulting in Brexit benefitting not only the capital region but various other areas in France as well.
Great news for Americans as well:
Paris Property Group‘s Kathryn Brown notes that Americans are currently the most numerous buyers in Paris, thanks to the near parity of the euro and the dollar. Brexit has also had a knock-on effect on the euro, with the vote to leave leading to a lack of confidence in the single currency. Thus, EUR/USD has dropped from 1.14 to 1.10, making it an opportune time for US buyers prospecting in France to finalize their property purchases.
Adding fuel to the fire, when US banks transfer some of their departments from London to France and Germany, hundreds of employees will have luxury apartments needs to buy or rent in the heart of Paris and in western Paris. These new customers increase the liquidity and price of the Parisian real estate market.
Photo credit: Alamy