The people have spoken. The markets have spoken.
As with all severe dislocations, there are many more questions than answers in the immediate aftermath and we are under no illusion that the ripple effect of Brexit and the inevitable adjustments will be difficult for governments, investors and businesses to navigate over the next few years.
Little change expected
However, amid this turmoil the market view from Hindle & Baldock, the French buying agent, is that little will change ‘on the ground’ for buyers of second homes in the South of France or the Alps and the referendum result does not change the desirability of these regions. Our retained clients usually take a long term fiscal view for what is essentially a lifestyle decision. Fortunately, there are no barriers to property ownership in France, regardless of nationality. British families and many other nationalities have owned, bought and sold property in France for generations. That is not going to change. Double taxation treaties between countries will also likely persist, since they are established bilaterally.
As long as we can demonstrate that there is no inherent long term to risk to asset values then buyers should not fear short term problems. The dynamics of the market over the last year or so have been one of sellers with unrealistic expectations waiting for the market to recover and buyers looking for sensible value before committing to a purchase. Looking ahead, we wouldn’t be surprised to see asking prices adjust to better reflect market values; and if they do, buying opportunities will emerge and transaction volumes will increase.
In these uncertain times we would highlight the considerable resilience of property values in both the Alps and key areas of the South of France. Both markets are characterised by long term historical growth and the real estate traded in those markets is generally of a high quality blue chip nature.
Overall values only dipped marginally after the GFC, and have steadily recovered since; in some resorts, there was no decline at all. Val d’Isère is an excellent example of this: its long ski season and world class ski area coupled with limited new development have preserved value. Méribel is considerably better value than Courchevel 1850, competes with 1550 and 1650 in terms of facilities, and is better located in the heart of the Three Valleys. St. Martin de Belleville is also one of our favourites. We continue to believe property values in Chamonix are attractive, given its proximity to Geneva, its challenging ski offering and all year appeal. The picture for Switzerland in our view is more nuanced: it is a safe haven for sure, and there’s no doubting the appeal for skiers, but values are somewhat influenced by availability for foreign buyers. Finally, we re-iterate our recommendation to focus on ‘snow sure’ resorts in terms of the premium they will continue to attract and marketability in the future.
The Côte d’Azur, St Tropez and environs, Provence
The markets in these areas are highly segmented with market ‘performance’ varying significantly between segments. It is fair to say that in some areas values have fallen back since 2008/9 but they have stabilised in the last couple of years with overall demand gently increasing. The worst performing areas tend to be characterised by having an oversupply of stock at similar price points. As we have pointed out many times before, the disconnect between ‘asking price’ and ‘value’ in our markets can be enormous. Therefore while pundits claim correctly ‘prices have fallen’ that is not to say values necessarily have.
We have been continually surprised at the resilience of our market with ‘best of breed’ properties in any given price range and area selling extremely well. It is secondary or compromised properties where value has been eroded. Whether it’s St Tropez, Valbonne or the heart of Provence, by acquiring the ‘best’, within your budget and without compromise, one is unlikely to lose. The golden rule to retaining value is to never accept second best.