The French residential market fared well compared to some other European countries in the years immediately following the global financial crisis. Modest price falls of 10% were recorded between 2008 and 2009, and France continued to enjoy foreign investment in its high end leisure hotspots.

While in recent years the country’s residential markets have battled with stop-start economic recovery and negative sentiment associated with some of President Hollande’s policies, 2014 has seen stability begin to return to the market once again.

Mortgage-driven, international buyers are becoming active again as the lending environment becomes more favourable and interest rates remain low.

Meanwhile, a temporary reduction of 25% on capital gains on second properties has been introduced in a bid to bring greater fluidity to the French market. In the most exclusive Riviera locations, Cap Ferrat and St Tropez, transaction volumes are starting to recover off a low base.

The French Riviera remains among the world’s most exclusive and desirable destinations for second home ownership. An extremely limited pool of stock (there are just 500 homes in exclusive Saint Jean Cap Ferrat, for example), coupled with demand from buyers around the world, means that the long term outlook for prices in this area are positive. Prospective purchasers will need to compare current pricing with the likelihood of a changed economic, Eurozone and political outlook. Demand – and prices – could 
recover quickly.

More peripheral Riviera locations such as Valbonne and Mougins have already seen British buyers return. Meanwhile, Russian and Middle Eastern buyers, central to the Riviera market, have demonstrated strong demand for rental properties.

Inland, Provence continues to stand the test of time and attracts buyers from across Europe, particularly from the UK. In South West France, the market for renovation projects has largely disappeared.

Buyers now are favouring turnkey properties, reflecting a search for convenience. Vendors have become realistic on pricing in the last five years; this is just as well because prospective purchasers are seeking good deals. Non-euro denominated purchasers find themselves in a particularly strong position against the weaker euro which is fuelling interest from Nordic and British buyers in particular.

An emerging trend in the ultra prime markets of the Bordeaux region has been the purchase of vineyards by Chinese investors. These are business ventures but fall firmly in 
the ‘investments of passion’ category as they reflect the growing fashion for fine wine appreciation, particularly claret, and are the ultimate addition to a prestige cellar.

As yet, there is no evidence of Chinese buying vineyards, or other types of real estate in Europe purely for leisure purposes.

This is also reflected in an early trend we are observing in the purchase of French hotels 
by Chinese nationals, a business rather than a lifestyle choice. Both trends do however echo the expansion of Chinese tourism in France. France led Europe in receiving 1.2 million Chinese tourists in 2012. This could still be an early indicator of second home investment in the region to come.

Taken from
Spotlight: Prime Residential Retreats 2014