Current economic turmoil
The Clinton administration, led by its Housing Secretary Henry Cisneros, in its quest to encourage home ownership for the poorer classes of the United States, encouraged the banks to lend to less creditworthy individuals. Roots of the sub-prime fiasco stem from this policy.
The tsunami has started to engulf many nations, particularly the real-estate values of those countries which were already substantially over-valued (Economist magazine report of December 2006 warned of property over-values in United States, Spain and UK – all for different reasons, i.e. America because of encouraging high risk borrowers; Spain because of overbuilding often without proper controls and permissions; UK because of the banks’ zeal for high loan-to-value percentages for buy-to-rent properties). Hence the current worries of what will happen to the housing market in every country.
We, here on the Côte d’Azur, are concerned mainly with effects on the housing market in our region. So we must first look at France in total and then the differences in the French Riviera where we see increases in values year-on-year – so will this continue or level-off?
I was impressed by the seminar given by one of the area’s prominent real-estate valuers earlier this month. There is government controlled bank lending in France, referred to as “responsible lending” where the repayments must be within easy reach of the borrower’s provable net disposable income – so the valuers appointed by the lending banks have a great responsibility to value correctly and to be fully aware of trends in their area. They use reliable material sources and public records. So, with thanks to JHP Valuation company of Nice, I quote from some of its seminar pages. The full JHP report is available if you email me: Jackie@FrenchRivieraPropertySearch.com
Several factors suggest price falls throughout France would be moderate in comparison to other countries
• Home ownership is low and still has room to grow
• French households debt level is low
• Structural demand of housing remains
• Prices will drop as the market needs to correct from years of rapid expansion
• The time of mindless investments in an ever-growing market is certainly over
(Several charts show these facts, source Banque de France)
The French Riviera should be less affected ….
• Although the market in this area is also slowing down, it is still over-performing all other French regions
• It remains one of the most attractive regions in Europe for secondary residence
• It is mostly protected by foreign investors and specific high-end products
• With the growth of high-net-worth individuals, prestige and leisure markets are less exposed
(Several charts show these facts, source Notaires d’Ile-de-France)
One of the most attractive regions in Europe for secondary residence ….
• Wealthiest department in terms of GDP per capita after Paris and Lyon
• Nice International Airport is France’s largest airport outside Paris
• The Côte d’Azur is less than a two hour flight from most European capitals
• You are guaranteed a mild climate in the winter and a wonderfully long summer (300 days’ sunshine a year)
• Best festivals and attractions in France (Cannes Film Festival, Grand Prix de Monaco, Tennis Masters Series, etc. etc.)
• Senior citizens from all over Europe are attracted by the region (climate and health care)
• With the development of low-cost flights and faster communication means (high bandwidth, 3G, webcam, etc) many high-level workers from European capitals are settling on the French Riviera
Mostly protected by foreign investors and specific high-end products ….
• A diversified base of foreign investors (from Russian to American and from all over Europe and the East) maintain the pressure on demand, in that they already represent 15% – 20% of apartment buyers and 70% of up-market house buyers. They have a strong purchasing power with their average purchase price nearly 2.5 times the local buyers’ budget
• The French Riviera offers high-end products for a numerous high-end clientele
• The offers along the coast are limited by nature and prices remain at very high levels. The beautiful products near the sea or on the top of the hills with sea view, should be less affected by the adjustment of the market
(information in the report gives specific information and charts on growth, prices, market trends – for Nice, Cannes, Antibes Juan-les-Pins, Cap d’Antibes – contact me for specifics)
Conclusion ….
Nobody can look into the future as we don’t have a crystal ball, but our region is well-armed to fight the turmoil ….
• Real Estate market adjustment is inevitable
• France is better positioned than most countries (USA, UK, Spain, Ireland) to limit the impact of the crisis
• The French Riviera is mostly protected by foreign investors and specific high-end products
• Luxury products and small goods should be better preserved while products aiming at local population will be hardly hit at all
Finally (my own comments) ….
• There is strict building control in each area of the Riviera, limiting height, density and design – so additional building is seldom seen. Massive developments Spanish-style are impossible/forbidden.
• Prices overall may drop as many buyers and sellers are still in a wait-and-see position
• It is obvious to me that if anyone has a financial problem in their own country then their secondary residence may be the first to go – which will bring more properties onto the market. Will there be enough demand from the wealthy in other countries to take up this slack? Will this therefore become a buying opportunity?
• Many people are telling me that they don’t trust their own banks; they don’t trust their portfolios to increase; so they want to put their capital into “bricks and mortar”.
• Yesterday the American stock market rose 900 points – but what will happen today?
My call to action – please feel free to discuss this with me and if you too are concerned about expenditure call me on Skype – my address is jaknburt.
October 30th, 2008 at 3:26 pm
Thank you Jackie
I agree with everything you have said .However i do believe that market conditions will worsen drastically and even the French riviera will be affected .HNI ’s are fast becoming a dying breed as the extravagances of the past few years take hold .The City of London (the words 5th largest economy ) has lost one third of its workforce and that coupled with the collapse of major banks and especially Lehman Bros and all the bonus’s that come with has hit the same people that want to own a slice of French riviera and those that do own will probably want to sell at some stage in order to shore up losses at home where most of these people are now in negative equity .this will create opportunity for some(me ) in the next coming 18 months .
kind Regards
Kostas Kazolides
October 30th, 2008 at 4:16 pm
MAdam Jackie,
As usual you have your finger firmly on the important point of the matter. Undoubtedly your indication of satisfaction of your personal environs is once more evidence of your worldly experience in life and a true example to us all of how one should enjoy every moment whenever possible.
Keep up the good work
Joe
October 30th, 2008 at 5:27 pm
Dear Jackie,
Count Joseph de Rossan expressed his opinion in such a gentlemanlike form that I want to subscribe to it and congratulate you for your initiative. In my mind, if you own properties in prime location and if you are not in a hurry to sell, you shouldn’t be worried. In my case, I will profit from the crisis to increase the value of the property by adding a 4th bathroom and a poolhouse. I am more worried by the mess created by the wild neoliberal capitalism and hope that we’ll move to a socially oriented market with strong rules and control. Never more a Fortis situation or a Lehmann Brothers (33 x debt/own funds ratio!) or a situation as Iceland is experiencing it with Kaupthing, Landsbanki and Glitnir, This crisis was completely unnecessary, built on greed and belief that the market and bankers would regulate themselves. Trust is fine, control is better!
Cordially
Freddy
October 31st, 2008 at 3:39 pm
Dear Jackie,
Congratulations on setting out so succintly where we are now. Pity you weren’t advising some of these people whose greed has made such a mess of many lives! I do know someone who is looking for riviera property, and I’ll forward your article to her.
As ever Rebecca
November 2nd, 2008 at 3:24 pm
Hi Jackie,
Wanted to put a message on your website after my recent visit and my journey through the great pictures – and all the information – which is especially useful in these turbulent times. Visiting your site is like taking a holiday on the Riviera – and makes me wish I were there permanently. When my Dreamboat really does come home, and I am ready to look for that property both my wife Pamela and I have in our minds – I know where I shall come – and without delay. In the meantime, visiting you and that great part of the world is some consolation – and thankfully, work brings me to Alpes Maritime often. And I can always come back to the website – at not charge !
I never hesitate in pointing those who ask my advice about properties on the Cote D’Azur to give them your web address and telephone.
Sending my very best wishes from cold and damp Cambridge England.
Your friend
Alan Barrell