Luxury real estate resists the health crisis

"I still continue to be amazed every day, I tell myself that it's too good to be true", admits to AFP Alexander Kraft, head of the real estate subsidiary of the luxury house Sotheby's.

Its French turnover increased by more than 5% last year, despite the Covid-19 crisis and several episodes of confinement that blocked economic activity for weeks.

The landscape is also satisfactory for other luxury real estate networks, a niche market without precise definition, but which is generally interested in homes over one million euros.

The two major French players in the sector, Barnes and Daniel Féau, both reported a decline in their sales in Paris as well as a stabilization of prices after years of increases, but considered the decline moderate in view of the crisis.

Several networks also point to a jump in sales in the provinces. At Barnes, they flew to destinations popular with the wealthiest, such as Biarritz and Deauville, even if the network does not say how much these successes offset the decline in Paris.

According to the different players, two main reasons explain this market boom in times of crisis. First, the multiple confinements, in particular the very strict one of spring 2020, have created new desires.

"People have never been locked up like that and it applies to everyone, even the wealthiest people who have larger possessions: they are used to traveling and were forced to stay put," explains Mr. Kraft.

"It's really a psychological phenomenon, people are frustrated and want a more comfortable home," he insists.

Safe investment

These observations echo those made by the mainstream networks on the real estate market as a whole. But, in the latter case, they did not necessarily give rise to massive purchasing movements.

By contrast, among the richest, these desires are sometimes so pressing that a few purchases, however several million euros, were completed remotely without the purchaser or his representatives setting foot in the accommodation.

“Normally, these people send at least one assistant, but here we really made 100% virtual sales,” said Mr. Kraft.

The other engine, more classic in times of crisis, is that real estate remains an investment deemed safe, even though the stock markets have not finally had a bad year 2020.

"High-end real estate has really been seen as a safe haven and an [option] alternative to gold or other investments," Thibault Saint-Vincent, president of Barnes, reported Thursday at a press conference.

The health crisis has however created multiple blockages, in particular travel restrictions which have changed the face of a usually cosmopolitan clientele.

"European and especially French buyers - especially from the United Kingdom, in anticipation of Brexit - have largely replaced our usual international customers unable to move," noted in a statement Charles-Marie Jottras, president of Daniel Féau.

It is difficult to predict how long foreigners will stay away from the French market, while the evolution of the health crisis remains uncertain and raises fears of lasting restrictions.

But, hopes Mr. Kraft, in view of the current expressions of interest, "once we can really travel (...) there is a good chance that there will be a real wave when the foreigners return".