Can Paris maintain its charm on Chinese property buyers in the midst of coronavirus pandemic?

Chinese investors have been picking up property in Paris in recent years, a decision that reaped handsome rewards as prices appreciated faster than most cities in Europe, bar one. The arrival of coronavirus could temper optimism this year.

Prices in the City of Light climbed 6.4 per cent last year after a 4.5 per cent gain in 2018, according to the Savills’ World Cities Prime Residential Index that tracks 16 cities in Europe, Asia, Middle East and Americas. Berlin topped the list with more than 8 per cent advance, while prices in other cities either eased or declined.

Overseas investors accounted for 16 per cent of property transactions in 2019, up from 15 per cent a year earlier, according to Savills, citing data from Paris notaries. Top foreign buyers included Chinese nationals, it added.

“The coronavirus aside, Paris is one of the top cities for cross-border buyers in 2020 due to several fundamentals,” said Georg Chmiel, executive chairman at property portal Juwai IQI. “There is significant new infrastructure development with the Grand Paris Express, price growth is favourable.”

Britain’s exit from the European Union promises to boost demand as organisations relocate their offices from London, while the build-up to the 2024 Summer Olympics in Paris is also seen aiding price appreciation, Chmiel said.

Why Chinese property investors are falling in love with Paris

While French developers are offering products that appeal to buyers from China, it’s likely that the response this year will be different as the coronavirus pandemic triggers travel alerts and lockdowns across Europe and hurts global financial markets.

“Physical presence is [required] in more than 80 per cent of sales and no one in Europe wants to do property inspection now, and I’m referring to all markets,” said Luiz Felipe Maia, director at Lisbon-based Maia International, which also markets property in Paris. “We work with a lot of foreign buyers, and you can imagine travel is almost banned in Europe.”

Like most countries in Europe, France is grappling with the deadly Covid-19 outbreak as cases cross 6,600 and the death toll nears 150. The country has also imposed stringent measures such as closure of cafes and restaurants and other non-essential public places to help contain the virus.

“The current outbreak will impact many overseas property markets as investors could delay or abandon their purchasing decision,” said Maggie Hu, assistant professor of real estate and finance at the Chinese University of Hong Kong.

While the event will take some gloss off recent gains, the fundamentals remain attractive, according to Chmiel. The country was ranked 11th in terms of its capacity to respond to public health emergencies, according to the Global Health Security Index released in October.

“If there’s one thing that France does well, it’s bureaucracy and the public sector,” Chmiel said. “It is a reasonable bet France will manage to contain the impact of the coronavirus outbreak.”

Despite gains in the past two years, prices remained relatively low in Paris at about €15,000 (US$16,663) per square metre, according to Savills, or two-thirds lower than Hong Kong’s €45,000. They are also lower than €24,000 in New York and €19,000 in London.

Chinese buyers pile into French luxury property, unhindered by ownership restrictions

Average interest rate on new housing loans fell to a historic low of 1.17 per cent in January, according to the French central bank. The economy grew 1.3 per cent in 2019, versus 0.6 per cent in Germany which is Europe’s largest economy.

“Concentrated within the capital’s historic centre, prime property in Paris is viewed as a safe, long-term store of wealth,” said Paul Tostevin, director of Savills World Research. “To international buyers, values are attractive by global standards.”

Properties worth between €1.9 million and €5 million in upscale districts such as Marais, Saint-Germain des Prés, Triangle d’Or, and Trocadéro were popular among international buyers in recent transactions.

“The investment story that is Paris is strong enough,” said Yo-Hann Tan, CEO and head of Asia-Pacific at BNP Paribas Real Estate Hong Kong. “What my team and I have been doing is to explain to Asian investors to put aside their preconceived ideas of language or legal system and look at the positives such as the economy.”