Where to invest in real estate in Paris in 2020?

When it comes to real estate, Paris and the Paris region are exceptional in France. Indeed, the exceptional number of tourists, the concentration of economic activity and the tension of the real estate market in the capital make it an exceptional territory, with prices per square meter averaging around €10,000 intramural.

New in recent years, the real estate fever in Paris has spread to the municipalities of the inner suburbs, whose prices are also beginning to rise rapidly as a result of an increasingly pervasive gentrification phenomenon. Thus, after the exceptional year 2019 in terms of real estate, marked by the symbolic surpassing of the one million transaction mark on the national territory, here are a few keys to make a smart investment in Paris in 2020.

A situation that should foster the dynamism of the Paris real estate market in 2020

With an average amount per transaction of €487,749 in 2019 - double that of 2005 - speculation is still running high as to a possible deflation of the Paris real estate "bubble" that some specialists are trying to predict. However, 2020 is expected to continue the upward trend of recent years, driven by several factors. Firstly, on the tourism side, the good news continues, with a 12% increase in tourism in 2019 compared to the previous year, with around 40 million tourists taking to the streets of the capital.

The specter of attacks is now behind us, and the upturn is expected to continue into 2020. Another positive factor for Parisian real estate is that the ECB is unlikely to change its policy of low key rates in 2020. As a result, interest rates charged by banks are expected to remain at their current historically low level of just over 1%. Thus, households will be able to continue to borrow on advantageous terms, an important parameter for the dynamism of the real estate market in Paris.

Olympic Games and Greater Paris, two projects for the future of the Paris region

Beyond the inner city of Paris, the entire Paris region has good real estate prospects for 2020. The focus is on the work relating to the 2024 Olympic Games and the Greater Paris developments, which will provide the suburbs with new transport and housing infrastructure. In fact, between now and 2030, 200 new kilometers of metro lines will be built, 68 new stations, for 2 million passengers expected in the long term. As far as housing is concerned, 18 million square meters of land will be made available to developers.

It goes without saying that the growth forecasts for the real estate market around these new stations are strong. As an example, line 15 south will link Pont de Sèvres to Noisy Champs and should be delivered as early as 2024, which will bring this sector considerably closer to the capital. Moreover, prices have already started to soar in the first crown: the price per square meter has, for example, rising by 10% in the Hauts-de-Seine department, or by 14.5% in the commune of Aubervilliers alone (€3610 on average per square meter).

Which are the boroughs to be favored intramural?

While the prospect of Greater Paris promises to generate substantial capital gains in the municipalities in the Paris suburbs, there is still business to be done within the city, despite a very tight real estate market. Even if rental yields are lower in Paris than in some provincial cities due to a very high purchase price (€10,000 per square meter on average, which can rise to €20,000 in some neighborhoods), the expectation of a nice capital gain on resale can still motivate some investor profiles. Those who do so will prefer the boroughs with the most advantageous ratio between the activity in the neighborhood and the price.

In this respect, the 13th, 15th, 17th, 18th, 19th and 20th arrondissements are those with the best promise of returns (both rental and resale), with prices still slightly below the €10,000 mark (except for the 17th arrondissement). A winning investment strategy includes renovating a property that is in poor condition and can be purchased at a good price. In addition, as in the koruna, these districts are also subject to a gradual gentrification phenomenon which should continue to boost prices in 2020.

Favoring small areas, a strategy that pays off in terms of rental investment

The French capital has recently experienced a phenomenon that is unparalleled on a national scale. Indeed, rental investment has jumped by 45% over the last two years, representing 31% of total transactions in 2019 (compared with 25% in France as a whole). This is particularly the case for senior executives who choose to invest in stone rather than other savings products. In terms of rental yields in the capital, it has been proven that the rental of small areas such as studios or T2s is the most profitable, with an average rental price per square meter higher than for areas greater than or equal to 50 square meters.

Thus, for a property of 30 square meters, Parisian tenants pay an average of 35 € per square meter per month or about 85% more than the average in the provinces. Of course, these small areas are mainly the preserve of young couples and young workers at the beginning of their career, whose rental period is generally short - between 1 and 3 years - which implies a significant turnover constraint for the owner.

The return of rent control, the only shadow on the horizon for investors in Paris

Thus, all signals appear to be green regarding the dynamism of the real estate market in Paris and the Paris region for 2020. Whether for rental investment or for the acquisition of a principal residence with the hope of realizing capital gains in the future, these two strategies seem justified by the strong attractiveness that characterizes the capital and its suburbs, both in terms of jobs and infrastructure projects - with Greater Paris and the Olympic Games in mind.

A small shadow to this idyllic picture, however, the rent framework, already in force from 2015 to 2017, has been reinstated since 1 July 2019. This measure sets a ceiling on the rents applicable by owners depending on the location of the leased property, the number of rooms and the time of construction - all Paris districts having been divided into 14 reference sectors. The new entry into force of this measure could therefore somewhat dampen investors' enthusiasm, even though Airbnb-type seasonal rentals now seem to be taking over in many neighborhoods.

Ultimately, the dynamism of the Paris real estate market is expected to continue in 2020.

In light of all these elements, the real estate specialists are announcing the dynamic year 2020 on the real estate market in Paris and the Paris region. Certain districts and certain municipalities in the crown are particularly to be favored, due to the gentrification phenomena at work and the major works in progress around the capital. Just a few observers predict that price increases in Paris will slow down in the last quarter of 2020, a hypothesis that has yet to be confirmed, given the current trend.