Only luxury real estate is still escaping the crisis

The year 2023 was quite good, but the discourse has evolved significantly. After months of describing their luxury real estate market as a niche impervious to the turbulence that has affected real estate in general, some of these professionals are facing the facts. They too are experiencing declining sales and price cuts. Only the most luxurious properties in the highly selective selection have financing issues and questions about price levels. The result: all continue to achieve record sales, sometimes at previously unachieved prices, but the overall turnover, as well as the average price per square meter, tends to decline. Here are the top 6 luxury real estate trends in 2023 and expected to continue through the end of 2024

1. The price drop is there, even for luxury…

At Daniel Féau, where the luxury market remains surprisingly insensitive to market turbulence, we now recognize “Family neighborhoods have suffered” and we talk about “a sharp adjustment in the balance of power between buyers and sellers”. Without going into more details, the brand recognizes the average prices in Paris “They are on top, like the rest of the markets in Paris”. For information, in 2022 they were €17,236/m² in Féau, and the average price correction in Paris was 6.3% in 2023 according to notaries. “We are seeing more and more significant negotiations and price adjustments in some cases between 5% and 20%, especially for goods that are overvalued or have some defects (work, decoration, etc.).”explains Alexander Kraft, CEO of Sotheby’s International Realty France-Monaco.

As for the Mercure group, we notice a fairly significant evolution in the geography of prices. “Our sales north of the Loire were 60% of the total, which is quite unprecedented and I can’t really explain, CEO Olivier de Chabot admits. In the entire Languedoc-Roussillon sector, around Nîmes, Arles, Montpellier and Sète, we are receiving significant price reductions, it is true. But it must also be said that prices increased by 60% compared to 2019.” Also proof that the heart of the market has calmed down, the average ticket has dropped significantly. “At one time, transactions were relatively easy between 1 and 1.5 million, but now we have come down to today’s transaction prices of 0.7 to 1.2 million euros”continues

At Junot we believe that, in Paris, it is the “bobo” districts, that is, those located in the east and north of the capital, that suffer the greatest reductions, with decreases that can reach 11 to 15%. Normally, they are the ones that have grown the fastest and strongest in recent years, while in more difficult times we retreat to safe values: especially the left side (5th, 6th and 7th) and also beautiful family apartments. District 16.

2… but not for all the luxury

If the discourse on the best-selling goods of the luxury chains has changed, everyone remembers that the top of the basket, ultra-luxury, continues to do particularly well. At Junot, a growing network, but currently with only 15 agencies in Paris (and one in Lille), we are pleased to have completed two Paris sales this year for over €50 million. As for the most expensive square meter, it was sold for 58,000 euros. We are far from fat.

The same story at Sotheby’s where several sales of 10 to 50 million euros are claimed. “As in 2022, in 2023 we have achieved many sales records, as well as sales between 5 and 10 million euros thanks to the increase in budgets”, emphasizes Alexander Kraft, CEO of Sotheby’s International Realty France-Monaco. Moreover, for Thibault de Saint Vincent, the founder and president of Barnes, this situation should continue. “Two phenomena seem to be firmly anchored: the emergence of the nomadic entrepreneurial population and the significant growth of the UHNWI (Ultra High Net Worth Individuals) monetary society, in response to recurring crises, which lead to an ever-increasing generation of money, explains This dual aspect should therefore encourage the growth of prestigious real estate transactions of over 5 million euros, as well as the attraction of international metropolises adapted to this client.’ It remains to be seen whether the French metropolises will be able to meet the expectations of these buyers in terms of quality of life, infrastructure and taxation.

3 Sales volume is falling…

Like the global market, luxury chains are experiencing declining sales, although some still talk of virtual stability. At Sotheby’s, with a sales volume of almost 1.5 billion euros in 2023, we accept a decrease of 7% compared to 2022, recalling that this level remains 2% higher than in 2021. As for Féau, the brand is content. recognize “Significant decline in volume” in the first three quarters of the year, followed by a slight recovery in sales in the last two months of the year, allowing Paris to surpass the 1.2 billion euro sales mark in 2023.

4 …and stocks are increasing

In a market suffering from structural shortages, increased inventory does not lead to significant sales. But increasing and diversifying the offer, however, allows the buyer to approach the negotiations more calmly. At Féau, however, we emphasize stock “which grew significantly in the first three quarters”, now tends to stabilize. On the Junot side, we claim a “stock of significant market goods”with the current 519 mandates, considering that it is part of them “Encouraging Signals for Smoother Transactions”.

5 The strangers wait

For a longer period than expected, French clients replaced the foreigners who were traditionally very present in luxury real estate. This post-Covid bracket is closing with a significant return from non-resident buyers. But nationalities tend to change, beyond the departure of the Russians. We notice quite clear progress in Junot among Middle Eastern and Asian customers. A recent study by Notaries of Greater Paris shows that the Lebanese now represent the second most important nationality (after the Americans) among non-resident buyers in Paris. At Mercure, where the clientele remains 90% French, we remain more traditional, although Northern Europe is increasingly present alongside North Americans. Regarding the Féau network, he considered this foreign customer to be “very loyal”, accounting for one third of the sales of over 3 million and almost half of the sales of over 10 million (48%). “The most represented foreign buyers are Americans, followed by the Middle East and some European nationalities, especially Scandinavians, Germans and Swiss. emphasizes Alexander Kraft for Sotheby’s. Compared to French buyers in previous years, they have larger budgets, often exceeding 3 to 20 million euros.’

6 No improvement is expected before the end of 2024

Most professionals do not expect much from the first half of 2024. They often believe that a wait-and-see attitude will work perfectly, especially for owners who dream of the Olympic Games effect and who avoid selling their home outright in hopes. first to rent at full price. On the other hand, if this famous effect of the Olympic Games has not been overestimated, the simultaneous arrival of a certain number of goods whose sale was delayed can lead to a significant drop in prices.

On the other hand, salvation could come in the second half of 2024. Among the elements that could encourage optimism, of course, are some reductions in lending rates and a soft return of banks that are more motivated to lend. At the end of “Maybe a little more decline”According to Féau, the return to market liquidity can also happen this summer, “Except for large exogenous shocks”. More surprisingly, Junot points out that it has recorded a significant drop in sales times in recent months. Another harbinger of a gradual return to a lighter market.

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