The UK is Leaving: the Brexit Effect on the French Property Market
The possibility that the UK would remain in the single market was recently quashed by British Prime Minister Theresa May. Has this accelerated the potential Brexit effect on the French property market?
For a long time now the nature of the UK’s departure from the European Union has been unclear. Would it cut ties completely and revert to WTO-trading rules, the so-called ‘hard’ option? Or would the UK try and negotiate a Norway and Switzerland-style option, maintaining economic but not political union?
Clarity at last, as Theresa May’s recent speech confirmed that Britain will seek to leave the single market but try to negotiate favorable access to its economic benefits. This has led to a flurry of stories regarding big financial players like HSBC, Lloyds and Goldman Sachs, relocating thousands of their staff to Paris or Frankfurt. Such moves would strengthen demand for Paris property and push prices up.
HSBC was already in the planning stages to move 1000 of its staff to Paris, and this latest development has made it a certainty. The investment bank already has a strong presence in France thanks to its acquisition of Credit Commercial de France (later rebranded HSBC France) in 2000. A thousand more high-earning professionals relocating to Paris will mean a surge of demand for higher-end Paris property.
Goldman Sachs and Lloyds Bank are reportedly looking to Germany rather than France. However some believe that, when it comes to business real estate, France has the upper hand, with Germany’s above-average price growth in the last few years leading investors to question how much further it can go.
The most current and obvious Brexit effect on the French property market is the return of French citizens from London. There are around 400,000 French nationals in London, many of whom might feel less at home since the vote. Such feelings might explain why last year they represented 17% of non-resident property purchases in Paris, a figure up from 9% in 2015.
Beyond these developments, the overall long-term economic effects are harder to deduce. Bar some miraculous deal for the UK, weakened economic figures for the Brits is almost a certainty in the short term, because of the apparent insecurity over its trading position. This reality will work to the advantage of Parisian and French property more widely, as these appear as comparatively more secure investments in the face of sweeping changes across the channel.
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