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Inside the Market / Market Trends

International buyers don’t cause higher real estate prices in Paris, study finds

Terrasse cafe in a historic Paris building

International buyers seem to scoop up more and more Paris properties each year, fueling rumors that they are bidding up real estate prices. A  recent study by the Paris Notaire Association dispels the myth.

One thing is certain: Paris is a global town. In addition to its status as the most visited city in the world,  15% of its resident population are foreigners. And more are coming: in 2014, 9.2% of Paris real estate purchases were not made by French citizens, the highest rate in a decade.

Accusations have circulated for years that international buyers cause higher real estate prices in Paris, and the Paris Notaire Association – the union of officials who oversee all property sales in the capital – set out to investigate. Their conclusion? Higher prices are not the fault of international buyers – but they did uncover some interesting insights on foreign buyers and how they have changed over time.

The notaire association looked specifically at the profile of international buyers. What they found was an increase in foreign-born residents buying a primary residence in Paris: 5.5% in 2014, versus 4% between 1996-2001. That contrasts with a decline in international buyers who do not live in Paris, buying a pied-a-terre or rental investment property. That figure was 3% of all 2014 buyers, compared with 4% in previous years. These second-home purchases are often larger, centrally located apartments in the most sought-after and affluent neighborhoods, making them more visible and thus a target for complaints about rising prices.

Paris Property Group founder, Miranda Bothe was pleased with the results of the study: “It’s nice to have an official report revealing the minimal influence that foreign buyers exert on the market. Of course Paris attracts international buyers, like London or New York or Hong Kong. If more buyers on the market are giving property prices a boost, it’s a small price to pay for the many cultural and financial contributions that these Paris owners offer the city.”

The study noted that the recent rise in foreign real estate purchases in Paris, from 8.2%  to 9.2%, could be explained, in part, as the result of the declining euro relative to the dollar and the pound, making the market more appealing for American and British buyers. However, the study’s authors also emphasized that, as their purchases are concentrated in the most central locations, foreign buyers’ ability to push up real estate prices is generally restricted to specific neighborhoods and apartment sizes.

The study also offers some interesting data on the mix of international buyers. It points out that the nationalities of foreign property owners tend to change over time. Italian buyers had a large historical presence in the market (25% of the international buyers in 2009) and remain the majority of foreign homeowners today. In the 1990’s, Algerian, Portuguese and Chinese led the international buyers, with American and British buyers gaining a growing presence in the early 2000’s. German owners have maintained a relatively stable presence in the market over the past 20 years. The study also noted that Americans, Italians and British tend to purchase apartments as second homes and live outside of France, while the Chinese and Portuguese buyers are more likely to be permanent residents in France.

The effect and presence of international buyers was also measured against other large cities. Relative to New York and London, international property buyers in Paris amount to a significantly smaller proportion of the population. In New York, for example, the percentage of foreign property buyers has grown to 21%, and, in the center of London, they currently comprise 75% of the market.  Compared to these other global cities, international real estate buyers in Paris maintain a smaller, more stable and specific role in the Parisian market.

 

Photo by Jennie Cottle

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