Looking back, 2008 proved to be a year of turmoil and economic surprises that few could have predicted. The international property bubble burst to the extent that in America, where people were encouraged to increase their debt through credit cards and impossible to pay mortgages, have been forced to move into their cars. There is no doubt that the situation looks grim but in Paris the market remains stable, and we at Flat Hunter are happy to say that all of our predictions in 2008 have been correct. As you can see by the chart below 2008 has been a good year in Paris, with prices rising by an average of 10%. In the second trimester growth had slowed but the numbers remained positive.
From this next chart you can see the evolution of the market in Paris in the last 5 years which indicates what a good investment buying in Paris can be. If you bought a property in Odéon 5 years ago for 500,000 Euros, it would be worth at least 900,000 Euros today. Meanwhile, you may have chosen to rent it out on a short term basis to pay off your mortgage, making your earnings of 400,000 Euros absolutely free.
We believe that 2009 will be another positive year in spite of the crisis. Prices will probably not rise, but Paris will not be seeing the kinds of reduction in value that other major cities have witnessed. In January we have already seen an increase in value of central apartments of high quality, where multiple offers have pushed the prices up.
The crisis has in fact brought a great deal of opportunity with it. With interest rates below 4.5% it is an excellent time to get a 20 year fixed rate mort gage. Even if prices stagnate or even drop a little, in 5-10 years it will have been an excellent investment move when the world is suffering from inflation. Property is the most stable investment during times of inflation, and although we at Flat Hunter are not economists, we believe that inflation is inevitable after the recession.
In order to ensure you make a good investment, we will continue to counsel you to buy a quality apartment in the first 8 arrondissements or in a micro market. Avoid any defaults such as lack of light, high floor with no elevator, low ceilings, ground floor, vis-à-vis, or an unkempt common area. These are guaranteed to reduce the value of the apartment should the crisis deepen.
Another positive impact of the crisis has been that negotiating has become much easier. We are able to counsel you on the price an apartment should be, and with fewer buyers on the market owners who want to sell “quickly” are more open to negotiating.
In conclusion if you are getting a mortgage then act quickly while interest rates are low and you will be grateful 10 years down the line. If you are paying in cash then this can help a great deal when negotiating, and should we enter a phase of inflation you will be happy to have your money safely invested away in Paris.
