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Turning Up the Heat on Paris and the Euro

I can’t ever remember an April like this one. For several weeks now, Paris has been experiencing Summer-like weather at a time of year when we’re usually still in sweaters and definitely in raincoats. Yet, everyday has been sunny and warm — the thermometer is pushing close to 30 degrees Celsius (86 degrees Fahrenheit) and predicted to remain this way for the rest of the week.

This must be part of global warming (“réchauffment de la terre”) and while we bask in the unseasonable sun enjoying the warmth and tanning rays, I am fearful for what might follow. Anyone who thinks it’s all a hoax should take a look at my window boxes as proof. The winter was so mild this past year that my geraniums never suffered the cold and have come back in full force with happy blossoms. I am already preparing to head to Darty to purchase an air conditioner for “Le Provençal” so the vacation renters can beat the heat that is sure to befall us.

Meanwhile, the rate of exchange has passed the $1.35 = 1€ mark, just like the temperature passing the norm. Someone asked yesterday if the Euro would ever come down to a more reasonable level and I realized that his point of view was reversed — it’s not that the Euro should come down, but that the dollar should come up! The question I hear over and over again is, too: Does it affect property purchases? And the answer is both negative and positive.

If you’re buying in dollars, then yes, it can affect your buying power, but on the other hand, anything you own in Euro value is now worth more in dollars — so it’s more worthwhile owning real assets in Euro value than dollar value, n’est-ce pas?

One important point to make, too, is that if property is purchased with a mortgage, then only the down payment (normally 20%) and the taxes and Notaire fees (about 7.5%) will be transferred at the current rate of exchange. Even that can be more controlled by using a currency broker such as HiFX that will save about half the transfer commissions. They also provide a “buy forward” service that allows you to convert the funds while the rate is best and hold them for future transfer.

Remember, that if the property is rented, then rental rates should be in Euro value, too, so that the mortgage and any profits are not affected by the rate of exchange. So, the bottom line is that the rate of exchange can be both a deterrent and an incentive to invest in real estate in Euro currency. From the way the market continues to move and the prices continue to climb, it hardly seems to frighten away the savvy investors.

Just yesterday, under the blue skies and in the warmth of the unseasonable sun, and in spite of the rate of exchange, three properties in Paris were designated to change hands: One spacious, sprawling and sunny three-bedroom apartment on rue Charlot for which the Promesse de Vente was signed; one luxurious penthouse on the Ile Saint-Louis with a view on Nôtre Dame, for which the offer was accepted (at the highest price per square meter I’ve ever experienced!) and my own next little pied-à-terre with a terrace (to be named “Le Saint-Tropez”) located in my own building for which the date was finally (1.5 years later) set to sign the Promesse de Vente (May 11th).

Happy Day!

A la prochaine…

Adrian Leeds

Editor, Parler Paris

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P.S. Watch your inbox for an announcement this week about the upcoming Living and Investing in France Conference July 7 and 8 in San Francisco!

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