2016 has been eventful both in France and worldwide. The outrage to the terrorism in Paris, Nice and elsewhere have had an obvious effect on the French national mood and the full ramifications have yet to be played out in the political arena. The presidential elections next Spring could yet deliver a surprise result. To this already febrile mix we can add the spices of Brexit, a Trump victory in the US elections and a revanchist Russia. It would be hard to imagine a more complex market backdrop than this and one could be easily forgiven for thinking the property markets of the Côte d’Azur, Provence and the Alps might have ground to a complete halt.
They have not.
They are however behaving in more nuanced and fragmented ways than we are used to. For the past 50 years the markets have operated in a way that can best be described as tidal. Either there has been a collective appetite for buying in the areas we cover, where demand builds over a number of years with prices rising steadily before reaching a crescendo, or a collective will to sell where prices fall back until the inevitable cycle starts again; the usual laws of supply and demand working in a manner familiar to all ‘would be’ economists.
This is not the case at the moment. To continue with the tidal metaphor it seems as though we are generally in a period of ‘slack water’ but with areas of eddies and currents that tend to confound market observers – some saying the market remains buoyant despite outside influences with others expressing despair that their markets are fragile. So who is correct?
In a sense both observations are entirely accurate. As a buyers’ agent we are not confined to looking at any given sector of the market, a problem that afflicts our estate agent friends. They tend to have an understandably myopic view limited to their immediate location. So why the contradictions in the wider market?
The simplistic answer to this boils down to lifestyle, geography and the price/value dynamic. What are the ‘drivers’ behind the decisions on where to buy? These drivers are not set in aspic as people’s desires and motivations evolve. What was ‘à la mode’ 20 years ago is now no longer the case. Tastes vary by nationality. This too has had an impact on how certain sectors of the market behave. Certain locations have changed in their nature. The characteristics that originally drew large numbers of people to an area have disappeared, often being victims of their own success.
So what is happening and where?
St Tropez and environs
St Tropez general view
St Tropez has to be the stand out winner of 2016 in terms of market activity. 2015 saw a consolidated return of confidence and that has largely continued throughout this year. There were fears that St Tropez had lost its lustre; that is definitely not the case. However, the market remains price sensitive with buyers looking for value. Sensibly priced, well located properties are selling well. So why is St Tropez a winner? Largely because its environment remains unspoilt, protected and not over developed. The combination of the sea, superyachts, glamour, vines, olive trees and swathes of woodland make the St Tropez peninsula a perfect distillation of the south of France dream for many buyers.
Alpes Maritimes – Arrieres Pays
A mixed story here. The days, 20 or more years ago, when large numbers of UK buyers would descend on the likes of Mougins, Valbonne, St Paul de Vence etc., to buy their second homes, have significantly diminished. The area has become much more developed with morning rush hour traffic jams the norm as it has gradually morphed into a dormitory for people working in Nice, Monaco and Sophia Antipolis. That is not to say it is a bad place to buy, it just depends on what your motivations are. If you need proximity to Nice airport or international schooling then it makes a great deal of sense. What you will no longer find however, is bucolic bliss. That idyll has long gone. 2016 has remained very much a buyer’s market with northern Europeans replacing their UK counterparts as the most numerous. We see the market remaining sluggish with static values during 2017.
Alpes Maritimes – Bord de la mer
Again, a mixed story. The principle players in the markets of Cap Ferrat, Cap Martin and Cap d’Antibes have largely been Russian or eastern European over the last 15 years with increasingly eye watering sums of money having been paid for houses, especially ‘pieds dans l’eau’ properties. Sums of €50m or much more were not unusual. The usual norms of formal valuation were temporarily suspended. That has now, unsurprisingly, come to an end. Transactional volumes in these markets have dropped significantly. With no obvious ‘buyer group’ in sight to replace the Russians high rollers, it is certain that values will fall back in a very thinly traded market. Other towns between Nice and Monaco, such as Villefranche, Eze and Beaulieu have been similarly subdued but not quite to the same extent as there is a greater diversity of values and choice than is the case on the Caps. Cannes continues to trade reasonably well to a diverse international and domestic French clientèle and there have been some notable sales to Scandanavians. There are two key elements that drive this trade. Firstly, the investment angle given the number of conferences and festivals that take place each year. Property owners are able to let their properties at almost any time of year which is an attractive prospect to many buyers. Secondly, there is year round ‘life’ in Cannes.
Monaco
Given the fiscal advantages that it confers on its residents, the Monaco real estate market behaves in a very different way to the neighbouring South of France. Only 3-4% of the potentially available stock is ever traded in any given year. This equates to approximately 500 transactions per annum. Prices are extremely high given the limited supply with an average of €40,000 per sqm. High quality, well located apartments can sometimes double that average value. The market remains extremely robust and there is little reason to see this dynamic changing, given Monaco’s highly accessible location and its fiscal environment.
Provence
Both the Luberon and the Alpilles continue to attract interest from both wealthy French and international buyers. This is unsurprising given the quality of environment and life in Provence. 2015 was a very good year with healthy transactional volumes. 2016 has been slightly quieter, primarily as a consequence of a reduction in UK buyers as Brexit’s impact made itself felt. That said, there have been some ‘healthy’ transactions and we believe the long term prospects for this market are sound. As both the Luberon and Alpilles are Regional Parks they are highly protected. This factor allied with excellent transport links, both rail and air, will ensure continuing demand.
The Alps
Frasserands (Chamonix) November 2016
2016 has, in a nutshell, been a solid year. Some UK buyers walked away from deals after the Brexit vote but that shock has now faded and confidence is returning, largely supported by very low Euro mortgage rates. French, Swiss, expats and other EU nationalities continue to buy. For some UK investors, there is interest in having less UK centric property assets given both Brexit and the eye-watering transaction costs in the UK. Values continue to remain broadly stable to robust in the markets we cover and as ever, well located sensibly priced property sells well. Ski property, as an asset class, continues to be a safe haven in prime locations. We advise our clients to consider snow-sure and large ‘well joined-up’ ski areas, with proximity to the slopes, as the primary criteria of any potential acquisition.
Les Trois Vallées
The largest ski area in the world continues to draw in buyers to the main villages. Values are stable in the face of generally slower activity this year. However, well-located chalets and apartments priced correctly don’t hang around for long. This applies, in particular, to our top pick in the region: St. Martin de Belleville. It is (but shouldn’t be, in our opinion) considerably better value than most of Méribel or Courchevel on a like-for-like basis.
Val d’Isère
In our view, this is the most resilient ski resort in the French Alps, serving one of the finest ski areas on the planet. Val d’Isère came out top in the 2016 Word Snow Awards and Brexit simply didn’t happen here despite its popularity with UK buyers. New developments in the village are severely restricted with the few that do launch continuing to sell out quickly. Val d’Isère remains “reassuringly expensive ”.
Sainte Foy
Twenty minutes down the road from Val d’Isère, St Foy punches above its weight in all but price. Values here are stable and competitive. For example, for the price of a two bedroom flat in Val d’Isère, one is able to buy a chalet with direct access to the slopes. The skiing is not particularly extensive but it is an ‘off-piste mecca’ to some and a mini Méribel to others.
Megève
After a good first six months of the year the market slowed down in the second half of the year. Fewer UK buyers after the Brexit vote was unsurprising but French and Swiss buyers continue to underpin the market. There is plenty for sale here, much at inflated asking prices, which can be 20-30% above the actual value of the property (this factor is of course not unique to Megève). As with all our markets, properties that are sensibly priced sell well. Buyers quite correctly remain price sensitive. Changes in planning laws point to a pick-up in supply, or at least floor space for sale, over the next 12-18 months.
Chamonix
UK buyers usually represent up to 20-30% of the market therefore interest has cooled post Brexit, but some bargain hunting has also been seen. Sellers are reluctant to budge so overall pricing is steady. French buyers are an important factor in Chamonix and interest from the Swiss side is picking up. Nice chalets can be a third or more cheaper than elsewhere in our coverage with plenty of refurbishment opportunities. Older chalets requiring renovation can be an opportunity to add value for the adventurous.
Verbier
Verbier is sufficiently international to have avoided the Brexit fall-out. Prices here remain stable despite a drop in activity after 2015. Availability for non-residents is reasonable, with around half the stock currently for sale being in that category. Verbier has always been expensive, and remains so. Ski-in/out chalets basically start at CHF10m, anything less involves varying degrees of modest compromise. We note there is certainly better value where the buyer is willing to refurbish, or enlarge an existing older building, of which there are plenty. Blue-chip status maintained.
Gstaad
It inhabits a parallel universe to any other ski destination. In fact to call it a ski destination is a stretch: more a lifestyle destination for the global élite. There’s plenty of easy skiing and the Diablerets glacier has a long season but it is rather spread out and altitude isn’t its forte. Having more than doubled in the last 10-15 years, property values here bear no resemblance to almost anywhere else in the Alps and remain strong. Take a spin through Oberbort up to the Palace or the Alpina, the uber-chalets in these prime locations can start at around CHF 50 m and go considerably higher. Most properties are POA, many are off-market. Look to the nearby villages, well preserved and typically Swiss, for example Saanen or Rougement, for something more ‘reasonable’.
Looking ahead to 2017…
In our review of 2015 and our outlook for 2016 we noted that 2015 had been a good year with significant confidence having returned to our markets, particularly amongst UK centric buyers. The Brexit vote was always going to be a seminal moment and so it has proved. The Trump vote in the USA has also added some uncertainty to the world’s geo-political makeup and who knows what will happen in the French presidential elections. Exciting times!
What effect will this have on our markets and should potential buyers still buy? Should buying decisions be delayed?
In short, no. Why?
Firstly, we stand by our advice of last year which pointed out that history is on the side of purchasers who take a medium to long term view on their ownership. We pointed out that the first estate agency in the Cote d’Azur was established in 1864 by John Taylor. In 2016, it is still going strong. The markets in the intervening years have had to face two world wars and any number of geo-political events. Property values have always endured in the longer term. An Alpine example is Val d’Isere. In 1938, the then president of the French Ski Federation declared ‘it is utter madness to build a ski station at Val d’Isere; failure is certain’. Like many forecasters of today, how wrong he was, as ‘Val’ has turned into one of the world’s most successful stations with real estate there proving to be a fantastic asset – we are often told that property values in Val d’Isère have never declined ! If you intend buying in the prime areas of France and are happy to take a medium to long term outlook then history has repeatedly demonstrated property investment has taken ‘world events’ in its stride.
Secondly, looking at our markets with a shorter term focus it seems unlikely that there will be much movement in values in the next 12 months. Clearly this will vary slightly from sector to sector but there is underlying stability that should reassure buyers.
As with most things in life, it’s easy to find reasons not to do something. If however you have longed for your own corner of France then there is no compelling reason not to do so. Would we add any caveats to that?
Yes. As a buyer, take advice and then, more advice. Finally, negotiate hard. You might just surprise yourself.