French Property Insider Volume XVIII, Issue 12 Thursday, March 19, 2020 • Paris, France
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Bonjour French Property Insider Subscriber,
Empty streets with Paris on Lockdown
Life in the City of Light one week ago was very, very different. As of President Emmanuel Macron's orders to lockdown the city at noon on Tuesday, everyday tasks came to a grinding halt and a bit of chaos set in. We're all trying to figure out how to manage under the circumstances.
The signing of a Promesse de Vente (the pre-sale) agreement of one our clients was scheduled for Monday afternoon at our notaire's office in the 7th district next to the Eiffel Tower. While it's a delight to peer at La Grande Dame from their windows, no one was prepared to travel there for the signing and risk contracting the coronavirus. To remedy the situation, proxies were created for both the buyer and seller so that the notaires could sign on their behalf.
During a teleconference yesterday using a program called Lifesize Video, my client, my search consultant and I could visually meet with the notaire, view the document, go through it inch-by-inch as we normally do when we're all in the same room and give him the approval to sign it. The notaire was the only person in his entire office, what is a huge space normally occupied by dozens of staff and clients. Jokingly, I asked, "Does this mean I never have to schlep across town for a signing!?"
Still, there is something to be said for having all parties around the same table...the human contact that creates a kind of energy...not always positive, but real, just the same.
Meanwhile, most transactions are experiencing long delays. We received a notice from our partner mortgage broker, Kim Bingham with Private Rate International Mortgage Brokers, who is trying to reel in the banking partners with whom she works. She wrote: "The advice is unanimous: Clients should contact their notaires to request extensions on the deadlines of their «clause suspensive» [loan contingency] and of the validity of their Promesse/Compromis de Vente. Try to negotiate for extensions as long as possible — 60 or 90 days beyond the deadlines. Under the circumstances these requests should not be deemed unreasonable. If the sellers don’t agree, good luck with putting the property back on the market for a quick sale!"
(We encourage you to contact Kim to learn more about getting a mortgage, but please be sure to tell her that we sent you!)
Kim's right. There are no property visits taking place. We have two rental searches in full swing right now and it's near to impossible to get a visit — no one wants to risk being out or meeting with others. If you're making a purchase without financing, then you can proceed more quickly.
In the Promesse de Vente we signed yesterday, our notaire inserted a clause to cover the coronavirus crisis:
CLAUSE DE PROROGATION DE DELAI EN CAS DE CONFINEMENT
Les parties conviennent qu'en raison de l'épidémie actuelle de coronavirus, et exclusivement en cas de confinement ordonné par le gouvernement et en conséquence de l'impossibilité avérée d'exécution des présentes, les délais des conditions suspensives et de réalisation des présentes (ou au choix l'ensemble des délais prévus aux présentes ) seront suspendus de plein droit jusqu'à la levée du confinement. Cette suspension aura pour terme le jour de la levée du confinement. Les différents délais recommenceront à courir le lendemain du jour de la levée du confinement pour le temps qu'il leur restait à courir avant la suspension.
DEADLINE EXTENSION CLAUSE IN CASE OF CONFINEMENT
The parties agree that due to the current coronavirus outbreak, and exclusively in the case of government-ordered containment and as a result of the proven impossibility of implementation of these, the timing of suspensive conditions and implementation of these (or, at your choice, all of the time frames provided for herewith to date) will be suspended as of right until the containment is lifted. This suspension will end on the day of the lifting of the containment. The various deadlines will start running again the day after the containment was lifted for the time they had left to run before the suspension.
A few of our clients in the midst of a transaction has questioned if they can re-negotiate the price, assuming that prices of property in Paris will come down as a result of the pandemic. They are equating the current economic issues with the crash of 2008. Don't do that! Don't panic. It's very, very different.
Experts say that the "economic upheaval caused by the outbreak will likely not be nearly as damaging or long-lasting as the historic downturn of 2007-09." The bounce-back is going to be a whole lot swifter. In fact, I personally predict that there will be a lot of pent-up frustration that will explode once we're free again and that will actually increase demand resulting in a new and even bigger rise in prices.
Read the USA Today article and a host of others that compare this situation with other downturns, such as The Great Recession when banks loaned money to unqualified buyers. As we reduce the number of infections, the economic toll will be limited. Travel and tourism is the hardest hit industry, while other industries are prospering, such as health and supporting industries. In today's world, consumers are in fairly good shape and unemployment will not be near what it was during The Great Recession. The downtown lasted 18 months, while this one is predicted to last about six months.
I don't need to reiterate what numerous economic experts are saying. Read the articles. It won't be nearly as bad as you might be thinking. Prior to the 2008 market crash, there was a housing bubble in the US that began in the 1990's and home prices had doubled just before the crash. The US took till 2012 to recover from that. In today's market, homes aren't as overpriced and mortgage rates are low, so housing can actually help offset other economic troubles.
In France, real estate prices had risen sharply between 2000 and 2008 and declined during the crisis. But, along with the United Kingdom, France stood out for its small scale and short-term of the downward movement in prices during 2008. Since mid-2009, house prices rose again, at a steady pace. There were a variety of reasons for that compared to the situation that took place in the US.
If you love statistics, you're going to LOVE this site.
The bottom line: While we're in lockdown waiting to be able to leave our homes and get back to business, that's exactly what's going to happen. We'll get back to business. And our recovery will be swift by comparison to other crises in the past, so don't expect the price of property in France to suffer greatly. I doubt you'll be offered too many bargains. If you want a bargain, NOW is the time to make a purchase...better sooner than later!
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