THE IMPACT OF LOCKDOWNON LUXURY REALTY

PARIS AND PARISIAN EXCLUSIVE WESTERN SUBURBS

Analysis carried out by Daniel Féau and Belles demeures de France between

the 8th and 15th of May 2020, questioning 902 potential buyers who were,

prior to lockdown, actively seeking to acquire an asset in Paris or the nearby

western suburbs.

DANIEL FÉAU & BELLES DEMEURES DE FRANCE IN A FEW WORDS:

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• A network compris ing some twenty estate agencies, founded over 70 years

ago and special is ing in luxury realty.

• Areas covered: Par is and the nearby western suburbs, Provence

• Market share:

Our Daniel Féau and Belles demeures de France agencies notably achieved 27

% of Parisian sales at prices between 2 and 4 mil l ion euros (total ing 1.526 bi l l ion

euros*) and 42,9 % of Parisian sales at prices in excess of 4 mil l ion euros in

2019 (total ing 515 mil l ion euros*). Each year, our agencies also sel l between 600

and 700 apartments and private houses priced from 500,000 to 2 mil l ion euro.

*Source: Chambre des Notaires de Paris

THE STATE OF THE MARKET AS IT STOOD ON THE 17TH OF MARCH 2020 :

Demand signi f icant ly exceeding supply, whatever the pr ice range and/or type of asset.

In concrete terms:

• A record number of purchasers,

• A record number of assets under offer or with a sales agreement,

• A very low stock of apartments, houses and pr ivate mansions immediately

avai lable, as a result of the delay between the market ing of an asset

and i ts sale being at at al l t ime low.

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THE AIM OF THE SURVEY:

• The aim was, as lockdown was l i f ted, to obtain a precise indicat ion regarding i f

and to what extent potent ia l buyers’ projects had been affected by this

unprecedented situat ion, and to envisage any possible repercussions on

demand and supply result ing from the cr is is.

• To measure to what extent the Covid-19 cr is is may have inf luenced the type

of asset that buyers were planning to acquire.

THE RESULTS, IN A FEW WORDS:

• 82.20% of buyers are sti l l active.

• In 7 out of 10 cases they shall maintain or increase the budget for

their acquisit ion.

• Although 3 out of 4 of those questioned foresee a drop in

property prices in France in general over the next 24 months,

over 6 out of 10 (61.50%) foresee stabil ity or an increase in price for

the type of asset they are seeking in Paris or in the nearby western suburbs.

• 75.10% of those questioned think that demand for 3/4 bed family

apartments shall continue to exceed supply, as a result of the

rarity of such assets and notably in Paris.

70.80% think that demand for assets with good rental potential

shall also continue to exceed supply as long as interest rates

remain attractive.

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THE PRINCIPAL RESULTS OF THE STUDY:

1. THE PERCENTAGE OF BUYERS INTENDING TO PURSUE THEIR PROJECT IS HIGHER THAN WE ANTICIPATED:

Only 10.40% of those quest ioned have put their project on standby, and 7.40% have

not yet come to a decis ion.

82.20% of those questioned intend to pursue their project : without delay for

64.20%, within the next few weeks for 22.90% and within the next few months for

12.90%.

2. BUYERS ARE MORE CONFIDENT - AND MORE ACTIVE - THAN WE EXPECTED:

About 82.10% of buyers quest ioned are seeking to acquire a main residence. Taking

into account the market segment in which Daniel Féau and Bel les demeures de France

operate, the immense major i ty of cl ients already own their main residence, and the

sale of the latter is often part of the project.

Over 70% of cl ients in this s i tuat ion, that is to say at the same t ime buyers and

sel lers, would prefer to f ind their future main residence before sell ing the one

they currently occupy – possibly taking on a br idge loan – rather than f ind themselves

in the contrary posit ion.

This seems to us the most s igni f icant indicator that confidence remains solid : in a si tuat ion in which conf idence has been lost ( for example in the autumn of 2008), the sale of the exist ing main residence is a deciding factor before

moving on to the acquisi t ion stage.

This conf idence is also ref lected in how those quest ioned expect pr ices to evolve.

Although a l i t t le over 75% think that property pr ices shal l drop over the next 24

months across France in general, over half (52.70%) foresee stabil ity or even an

increase in prices in Paris and in the nearby western suburbs , with over 6 out of

10 (61.50%) envisaging a simi lar s i tuat ion for the type of asset that they are current ly

seeking.

The planned budget for the acquisi t ion would also appear to ref lect conf idence, with

over 70% of those quest ioned conf irming that they shal l maintain or even increase

funds for their project.

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Taking into account the results of our survey, this conf idence which seems to be

ref lected in the act iv i ty that our agencies have witnessed may be explained by the

fol lowing:

• 64.40% of those quest ioned agree that instabi l i ty in the stock exchange

shal l probably lead to an increased demand for tangible assets, and notably realty.

• 75.10% think that the demand for 3/4 bed family apartments shal l cont inue

to exceed supply, owing to the rar i ty of such assets and part icular ly in Par is.

• 70.80% think that the demand for realty assets with strong rental potent ia l

shal l cont inue to exceed supply as long as interest rates remain attract ive.

• 74.30% of those quest ioned agree that, as a result of the signi f icant debt that

western states have incurred and wi l l have to repay, inflation is foreseeable in

the years ahead which, once again, shal l encourage the acquisi t ion of realty

by means of credit .

• 55.70% envisage that wealthy foreign buyers shal l once more invest in

upmarket realty as soon as they can come back to France.

• 78.70% of those quest ioned foresee an increase in interest rates over the

coming months.

3. ALTHOUGH SOME BUYERS HAVE, IN CERTAIN CASES, CHANGED THEIR SEARCH CRITERIA AS A RESULT OF THE COVID-19 CRISIS:

About 70% of those quest ioned conf irm that the cr is is has not altered the character ist ics

of the property that they were, and are st i l l seeking. This r ises to 81.30% for buyers

with a budget exceeding 2.5M€. No signi f icant change is therefore to be ant ic ipated

as far as this aspect is concerned.

The results show however that:

• 76,1% of those quest ioned think that the development of working from home

shal l have an effect on demand.

• 68% of those quest ioned think that over the next few months demand for

secondary residences shal l intensi fy.

This would seem to be upheld by the strong demand we have witnessed notably:

• In our Saint-Cloud and Versai l les agencies for propert ies in the western suburbs,

• In our Provence agency for propert ies located around Aix-en- Provence.

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CONCLUSION:

Fol lowing two months of lockdown, the market appears nonetheless to be dynamic ,

and signi f icant ly more so than we imagined a few weeks ago.

During the week fol lowing the reopening of our agencies, we have been in contact

with a signi f icant proport ion of buyers who we were accompanying up to the 17th of

March. Offers have been submitted and, in a certain number of cases, have already

been accepted. We would imagine, taking into account v is i ts to our websites and the

results of this survey, that the other potent ia l buyers shal l short ly also be contact ing

us in order to pursue their project.

As far as vendors are concerned, surprisingly, l i tt le seems to have changed

regarding their project .

Once again, realty seems to conf irm i ts value as a tangible asset . Lockdown may

to some extent have reinforced the not ion that comfort in a house or apartment is

absolutely essent ia l for, not only do owners obviously possess a residence, but above

al l they l ive in it .

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