The price of prime residential property in London is slowing, but still outstripping Paris, which has seen little or no price growth since 2012, according to a new report from Chestertons comparing and contrasting Europe's leading residential property markets.
The report, entitled A Tale of Two Cities, was commissioned to mark a new partnership between Chestertons, one of London's leading residential agents, and the well-established Consultants Immobilier, which has nine Paris offices and specialises in mid to upper-tier property sales and lettings.
While the report found the two cities had much in common – high quality of life, strong demand for good-quality residential property that is outstripping supply, complex but congested transport infrastructure and rapidly growing populations – there are notable differences between the two.
While London has a considerable amount of development activity and is attracting both residents and investment from overseas, Paris has not seen the same level of construction activity and uncertainties over taxation and the ongoing eurozone crisis have had appreciable dampening effects on investor appetite and price growth. Paris also has more restrictive planning controls than London, and the strength of sterling against the euro means UK based buyers in Paris are in a stronger position than their French counterparts looking to invest in London.
Nick Barnes, Head of Research at Chestertons, says: "There are many similarities between the two cities – both are the capital, largest city and strongest property market in their respective countries. Demand outweighs supply in both, and both have large number of overseas residents and buyers – though London has a much higher proportion of both.
"Both are growing – though London population growth is stronger and growing at its fastest ever rate, with a record population figure of 8.61m reached this year – and both recognise the importance of improving infrastructure and upgrading transport provision to cope with this future growth. "However, we have seen a number of key divergences over the past couple of years in the London and Paris residential property markets," Barnes adds. "Price growth has been disappointing in Paris, whereas in London the general market, while slowing, is still experiencing healthy growth outside of some prime central areas. As a result property values in London are considerably higher than in Paris, and shorter term price growth prospects do look better in London.
"In considering why the two markets have diverged so much in recent times we must take into account that planning controls in Paris are more restrictive – London is awash with cranes, but new development is extremely limited in Paris. It remains to be seen how much recent Government legislation to further ease planning restrictions in the UK will continue to widen this gap," Barnes continues.
"Political and economic factors also have had an impact in Paris. The election of Francois Hollande in the 2012 Presidential elections on a socialist ticket was the trigger for an exodus of high-net worth individuals seeking to avoid new wealth taxes. Many of those leaving the Paris market came to London, bolstering an already burgeoning population of French expats in the city. On the other hand, with the ongoing uncertainty arising from Greece's debt crisis, the pound has experienced historic favourable exchange rates against the euro, meaning investment opportunities for hard currency buyers from outside the eurozone are currently very good in Paris.
"That being said the two cities are quite alike in terms of demographics and economic outlook, so it will be interesting to see how they respectively tackle their growing housing shortages as well as funding and delivering major infrastructure improvements, attracting investment, creating jobs and tackling pollution," Barnes concludes.