Paris Property Investment - Irish Investor View

Sunday , September 09, 2007 -

The world’s most beautiful city can also be a profitable destination for property investors, writes Ginetta Vedrickas.

Few overseas destinations can claim the cachet of Paris.

Famously the most romantic city on earth, Paris is now attracting a hardernosed breed - Irish property investors.

Marie-Pierre Saint-Martin, who runs the property search agency London Paris Dream Home, describes interest from Irish buyers as ‘‘a steady stream. Irish buyers seem to have lots of money and, like everyone else, they realise that Paris is the most beautiful city in the world’’.

With its wide boulevards, distinctive period architecture and fabulous shopping and nightlife, Paris attracts hordes of visitors annually along with growing numbers of ex-pats coming here to work.

London-based Saint-Martin is French, but sees a stark contrast between French attitudes and those of Irish and British buyers.

‘‘Even when Irish and British clients buy for personal use, investment is always part of the attraction,” she said. ‘‘The French never mention it.”

Yet she also believes that the Irish market has not yet fully realised the city’s true potential as a buy-to-let destination: ‘‘Many of my Irish clients live in the countryside and are seeking a city pied-a’-terre for their own use. But the city is a great place for investment and demand still far outweighs supply.”

Among Irish buyers, SaintMartin sees a 50/50 split between investors and those buying purely for their own use.

With a detailed knowledge of the city and its property market, she advises regularly on exactly what and where to buy for optimum returns.

‘‘If it’s for your own use then buyers can act on personal taste, but if it’s a question of investment I often talk people out of one flat and advise them to buy another,” she said. ‘‘You must always think about the rental potential and how easy it will be to sell on when the time comes.”

Typically, small studio apartments in good areas of the city cost a minimum of €133,000 and Saint-Martin cautioned against spending less. One-bedroom apartments of a high standard cost between €148,000 and €222,000, and Saint-Martin advised spending at the lower end to achieve better yields.

‘‘Apartments of between 16 to 20 square metres usually rent for around €600 per month, so it’s better to spend less,” she said. ‘‘If clients want a bigger investment, I often advise increasing the budget slightly and buying two smaller apartments rather than one large one.”

Currently, typical yields are about 5 per cent, as prices in the city have been rising steeply in recent years. Saint-Martin estimates capital growth at about 10 per cent on average but, unlike the doom merchants she reads in the French press, Saint-Martin believes that this year will not bring the heralded slump but will see steady growth of between 6 and 7 per cent.

‘‘There’s lots of talk that what is happening in the US will move across to Europe, but I don’t see that happening any time soon in Paris,” she said.

One of the world’s largest private real estate companies, Tishman Speyer, is best known for commercial development in Paris.

The managing director of its French business, Bernard Penaud, sounded a cautionary note for residential investors: ‘‘Agents tell me that the top and lower ends of the market are still doing well, but that the middle is suffering slightly.

‘‘I don’t think that we will be experiencing a crash, as demand still far outweighs supply, but I think we could be in for a soft landing.” Most buyers in Paris typically seek the ‘Hausmannien-style’ period properties for which the city is famous.

There are many fashionable districts among the city’s 20 arrondissements, but for up-and-coming hotspots, Saint-Martin points to the tenth arrondissement, around the Gare du Nord, which is undergoing substantial renovation and therefore attracting buyers.

The Canal Saint Martin area is also fast becoming a trendy spot, as are the areas around the Canal de l’Ourcq, west of the 19th and the Rue Oberkampf. Here, good one-bedroom apartments measuring about 40 square metres cost €250,000.

New-build and off-plan purchasing is rare in Paris and Saint-Martin sees few developments or large-scale developers moving into the city.

‘‘Unlike London, Paris is much too small for that. Any new development attracts huge amounts of attention in the press as it really is so rare.”

One firm which is developing in Paris is the City Lofts Group, which is selling units in a scheme in the heart of the city. With a brief of ‘‘establishing visionary new schemes in the heart of thriving cities and transforming historic buildings into outstanding, mixed use developments’’, the company aims to capitalise on the market for high-quality, stylish city apartments.

Founded in 1997, the group has so far completed 12 developments valued at €243 million in Britain, but 81 Avenue Victor Hugo is its first venture into mainland Europe.

Work on the development started last autumn with the refurbishment of a historic early 20th century building, which is a fine example of Haussmann-style architecture. The historic residence was formerly home to a Romanian princess, Bassaraba de Brancovan, before it was divided into individual apartments.

Located in the prestigious sixth arrondissement, the scheme is within walking distance of landmarks such as the Arc de Triomphe, the Eiffel Tower, the Trocadero and the Champs Elysees.

The building is being restored and developed to create a mixed-use scheme made up of four studios, 24 one to four-bedroom apartments and four commercial units.

The apartments will be finished to the highest specification and benefit from Conran-designed interiors. Prices start from about €325,000 for studios up to €3.3 million for a four-bedroom apartment.

With completion set for next spring, the apartments strike the perfect balance between contemporary design and historic architecture. The developer is targeting a wide cross section of buyers, from international business travellers seeking stylish pieds-a’-terre to families who want sizeable homes.

Many of the apartments have views of the internal courtyard as well as high ceilings and large windows, with some featuring ornate iron balconies and views of the skyline, including the Eiffel Tower.

Along with high-end specifications, the properties have access to full services more typical of US developments.

There will be a full 24-hour concierge service along with a 24-hour CCTV system, a valet parking service and a microgym in the building’s basement.

Andy Hurst of City Lofts believes that the development is a first for Paris generally.

‘‘Despite minimal advertising, it’s already selling well to high net individuals. Unlike most top-end developments, our interiors are contemporary rather than traditional.

‘‘From reactions so far from the French media we can see that they are really blown away, because they’ve seen nothing like this before here. Unlike Britain, the French have not embraced city living on the same scale.”

Trish Mason of VEF is finding that French cities are increasingly popular with investors, as they offer year-round rental returns and excellent capital growth; she said that this was particularly true of Paris.

‘‘The French capital is the largest for business,” she said. ‘‘It represents over one quarter of the country’s GDP and hosts the head offices of nearly one in two major French companies,” she said. ‘‘This attracts a large workforce that increases demand for property, which far exceeds supply. The result is a boost for residential and rental markets.”

Last year, growth fell to 8 per cent, but Mason believes that Paris remains a desirable yet expensive place to buy. This is driving buyers further out of the city centre to the green suburbs of Val d’Europe to the east and Val d’Oise to the north, where demand is high and capital appreciation is up to 20 per cent in certain areas.

Bothof these areas are home to some of the largest business parks in Paris, which means a short commute for locals as well as an attractive quality of life. The population of Val d’Europe is set to double by 2020, while Val d’Oise is struggling to supply enough new property to meet demand, with a current deficit running at 1,000 units annually.

Mason said that aparthotels - developments offering hotel-like services and facilities - remain the most rewarding type of investment.

Normally located in or near business parks, they produce high and guaranteed rental returns, as well as strong capital appreciation.

New developments sell quickly and mostly to locals, which is a reassuring factor for investors. VEF recently sold a 200-unit development in Val d’Oise in just nine months, compared with an average sale time of 18 months.

The firm is currently selling the second phase of an off-plan development, the Relais Spa in Roissy-en-France. Lying within a suburb of Par is, the scheme is 30 minutes from the centre by train, five minutes by car to Charles de Gaulle Airport and 15 minutes from Disneyland Paris.

With prices from€167,700 to €352,658, the development has luxury spa facilities on site including a pool and full conference facilities. The development is also offered on leaseback and yields range from 5.66 per cent to 5.84 per cent with a full management service. Since the scheme first went on the market last October, prices have risen by 15 per cent.

Assetz France is also selling a range of developments on the city’s outskirts, including Les Docks St Denis, where prices start from €150,000.

Apartments at Residence du Golf are set within the grounds of a beautiful 19th century chateau with prices starting from €84,916.

Le Marais: the cultural centre

Bernard Gleeson from Dublin is buying a one-bedroom apartment in Le Marais in central Paris through London Paris Dream Home.

‘‘I lived in Paris as a student and have always loved the city. It’s not too far from Dublin and there’s very easy access now. I love the way it’s so compact and easy to walk around. I’ve bought in the 4th arrondissement, Le Marais, which I love for the culture there. There’s so much to see and do – I like going to classical concerts, the opera, galleries and even just strolling around, you never get bored.

‘‘I also own properties in Berlin and Budapest; I’m a real city person and I debated buying in Barcelona, but chose Paris instead which I prefer. I speak French, but not enough to conduct a business transaction and, after visiting estate agents and not finding their attitude terribly helpful, I knew I’d need help with buying there. I came across Marie-Pierre’s [Saint-Martin] name on the internet and saw her on an RTE programme and, after speaking with her, I knew that she’d be helpful and efficient.

‘‘Marie-Pierre found a one-bedroom apartment in a typical building dating from the late 1800s, which I’m now in the process of buying. It cost €260,000 but needs around €30,000 worth of work, which Marie-Pierre is also organising.

‘‘Part of the reason for buying was investment and I’m looking partly at capital appreciation and rental income, as I’ll let it on short-term lets when I’m not using it myself. I have no worries at all about investing in Paris.

‘‘Nothing has happened in terms of progress during August – they certainly live the life over there – but I’m hopeful that renovation work will start next month and I’m looking forward to being in by December.”