The global feeling seems to be that worldwide real estate is in a crisis and that the market is unhealthy. Prices had reached exaggerated levels and markets had gotten carried away, the worst being in the United States (+126% between 1997 and 2007), Spain (+173%) and Ireland (+240%). The blame has been given to numerous things, from the state of the “basic” economy to demographic pressure to interest rates. The truth is much more obvious. The Nobel prize winning economist, Joseph E. Stiglitz put it best when he defined a bubble: “if the reason that the price is high today is only because investors believe that the selling price will be high tomorrow- when “fundamental” factors do not seem to justify such a price- then a bubble exists.”
Logically prices have had to correct themselves and the results have been devastating. In the United States prices have backed up to 4.5% and in Ireland priced dropped to 7.5% over 2007. As with the rest of the world France’s prices rose to 131% over a ten year period from 1997 to 2007 and naturally the prices have adjusted to 3.5%. The question is, then, is now a good time to invest in Paris?
All indicators point to yes. Amid the crisis prices in central Paris continue to rise due to a number of reasons. Along with factors such as longer life expectancies, later marriages and more divorce, Paris is also the most visited city in the world attracting over 28 million tourists each year. A constant stream of tourists guarantee good returns on short term leasing in central Paris, while foreigners who dream of living in the City of Lights are not necessarily influenced by the state of the French market or the crisis abroad. In addition to this France is facing a housing crisis and has a housing deficit of at least 800,000 units, 75,000 of which are needed in Paris alone.
If the market slowdown did reach Paris then prices would not drop in the centre. Currently there are 50 offers in the 20th for every 2 in the centre. Prices between high and low quality apartments would begin to separate, something that is long overdue. However, quality central apartments would not decrease in value. The pressure on the system is so strong that the slowdown of the past few months could not last. Now that interest rates have been stabilized the market is picking up again making now a good time to get informed of current prices and compare. Buy now while the banks are still digesting the financial crisis and there will be evident savings in the long term.
