The Ups and Downs of the Paris Property Market: From 2002 to Now

As property consultants, we have worn many “casquettes” (hats). Those casquettes have come in all shapes and sizes. Their styles have changed over the years, with the tide of fashion. Let me explain the metaphors.

When we began working with property as long ago as 2002, there was no one (that I knew of) in Paris specifically devoted to assisting North Americans in finding property for purchase. The demand for such assistance grew naturally out of the newsletters and articles I was writing for International Living, the publication I was working for and for which I established an office in Paris. It was early on in our endeavors that we launched the first Living and Investing in France Conference in May of 2002 here in Paris (with dozens that followed) where we discussed purchasing property in France at length over the course of the three days of the conference to a substantial group of information-thirsty Francophiles.

The desire for investing in France was ripe at the time. The economy in the U.S. and Canada was strong, the rate of exchange very favorable and the interest in France growing at an alarming rate. Apartments for short-term rental were a relatively new idea, but growing, making the desire to invest even stronger. Some of the first properties in which we engaged were purchased for the company itself, wanting to test the market.

The desire and need grew very rapidly. We were searching for about four or five properties a month for small to medium-sized clients wanting a “pied-à-terre” for themselves to use a few weeks a year, and rent the rest of the year. Properties were generally as small as studios and as large as three bedrooms. Our American clients were willing to invest a lot into “haut de gamme” renovation/decoration to attract the best tenants at the highest rates. The rental market grew by leaps and bounds.

In 2006, I made my own first investment in a rental property and began to offer the apartments of our clients for vacation rental and management. Everyone was happy. The owners were yielding up to 10% returns, they were enjoying their properties a few times a year and our guests were thrilled to be in luxury apartments vs a tiny hotel room with limited amenities. Foreign investments were pouring in to Paris and I used to joke at the time that the City of Paris was going to give me a medal or key to the city to thank us for all the money we were contributing to their economy. Little did we know at the time that the economy wasn’t as important to the French as was creating affordable housing for their residents and we would become their enemy, instead.

In 2008, when the ceiling came crashing down on the American economy, our clients no longer had the money to invest in property, but still wanted to travel to France. They came by the truckloads and loved renting an apartment, even if they didn’t have the means to buy one. Our rental business grew and those who had purchased property prior to that were laughing all the way to the proverbial bank as their occupancy rates increased and the value of property had grown considerably. That year, while the U.S. property market was suffering, Paris property remained soft, but relatively stable and the year after in 2009, it had increased in value by as much as 23%. Our owners were happy as clams in their well-decorated Paris apartments.

At the end of 2009, a bomb dropped on the budding market when the city decided to put a clamp on the property speculation market to make more room for  residents by enforcing rental laws that had actually been on the books since 1948, but until then unenforced. At the same time, Airbnb was in its infancy, an innovative online marketplace and hospitality service for people to lease or rent short-term lodging by directly connecting the landlord with the tenant, bypassing the middleman (the agencies) and reducing the costs. It was at this moment that the conflict seriously began between well-touristed cities, such as Paris, and the battle for maintaining housing for residents.

As the interest in investment and vacation apartment lodging grew, the residential housing market suffered and the city administrations around the world (and particularly in Paris) and the new rental industry butted heads. Airbnb founders Brian Chesky, Joe Gebbia and Nathan Blecharczyk, likely had no idea at the time, that the blow-up mattress on the floor of Chesky’s and Gebbia’s living room to house the overflow of conference attendees in San Francisco, would lead to such a major industry and big debate with city administrators around the world. (Paris continues to be Airbnb’s largest market with almost 60,000 listings despite the conflicts.)

Since 2009, we’ve avidly watched and managed the conflict with the city of Paris and our competitors. Airbnb became our biggest competitor in the beginning years, as we ignored the city’s growing armed forces to battle the problem of their housing shortage. Airbnb was offering something the agencies couldn’t offer: unprofessionally managed rentals at a reduced rate and direct contact with the owners. Rather than fight them, we joined them, as did the other agencies, by listing all of our properties with Airbnb as well as other online platforms, such as VRBO, Homeaway and Sabbatical Homes.

Ian Brossat and Paris Mayor Anne Hidalgo

City tactics to ferret out the offenders — property owners renting “illegally” — were (and still are) in the hands of Ian Brossat, a registered Communist (who I joke doesn’t want anyone to own any property at all), who is determined to shut down the vacation rental market regardless of who or what it hurts. “Illegally” means those who own a secondary property (such as our clients’) rented less than one year, or a primary residence rented more than 120 days a year. The city is on his side as are many of the city residents, who don’t benefit from the revenues of their own properties, but have to endure the nuisance of strangers in and out of their buildings with suitcases making too much noise in the stairwells and hallways.

With the city tactics have come expensive fines (now up to 50,000€ for those the courts rule against) and the fear of those fines. Many properties have been removed from the market, as owners don’t want to risk being caught. I sold my own two short-term rental apartments, one of which was intended for my future retirement, to my great dismay. Our business has changed considerably as a result and strangely enough, our bookings have increased as available properties with other agencies on the market have decreased. In addition, many of our clients’ apartments are now only available for long-term (one year) rental thanks to the fear, even though it means they won’t have usage of the apartment themselves while being rented. This is very disappointing to the owners, of course.

Interestingly and fortunately, a one-year lease carries with it a mandatory one-month cancellation clause. That means that a tenant can legally give notice the day he signs the lease to vacate 30 days later! And that provides some flexibility for those who wish to rent for less than one year. To follow the city guidelines, we must advertise the properties for long-term rental, even though that term can be easily ended at any time, legally.

At present, would-be buyers are more hesitant to make purchases given the volatility of the rental market, hence the foreign investment market has made big changes. The small to medium-sized investors are fewer, while big investors who don’t need the rental income to support their properties are finding bargains in big, luxury properties and buying them up, knowing appreciation is still worth it, and they prefer to have their own usage. These apartments will remain unoccupied (except for their short stays), and therefore contribute to the housing shortage…against the city’s plan to recuperate them for Parisians.

Exchange rate Euro to Dollar

Investors still know that it’s impossible to lose on the purchase of a property in Paris. While the city officials are working hard to keep prices down and affordable for the average Parisian, values are still rising in the City of Light and property is getting more expensive every day. This is because Paris is a finite city that can’t go up (building height restrictions) and can’t go out (the périphérique is the official border), therefore what exists continues to increase in value.

Plus, the need will never go away. Property owners will want and need to rent to support the cost of their investments and visitors will need and want apartment-style accommodations. Interest in living in Paris and France by Americans is stronger than ever, thanks to the current U.S. political environment and strong economy. Our coffers are overflowing with Francophiles wanting to spend a few months or a year or more here and instead of buying, are renting long-term. Our search consultants are pounding the pavement ferreting out viable properties and our booking staff is concentrating now on those wishing to rent our one-time short-term apartments for a few months or more.

If you are reading this Nouvellettre®, then you likely fall into one of these many categories of Francophiles. This means you’ve been thinking about buying and renting or not, or renting and testing out the waters. Either way, we are still here, after all the ups and downs, twists and turns, to help you in any way we can. You will find our advice very valuable, regardless of which direction you take, and we can help you find the property of your dreams, whether for purchase or for rent.

A bientôt,

Adrian Leeds
Adrian Leeds Group

(for throwback Thursday, circa 1959)

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